the paradox of the automotive industry

At the Volkswagen factory in Zwickau, Saxony, where the ID.3 is produced, on February 25, 2020.

Strange times for the European car industry. Shaken by the vote of the Parliament of Strasbourg, June 8, which prohibits the sale of new thermal engines from 2035, it notes, for almost a year, a continuous decline in registrations. May was no exception. According to figures from the Association of European Automobile Manufacturers (ACEA), released on Thursday June 16, sales of new passenger cars fell by 11.2% last month compared to the same period in 2021. apart from the particular period of Covid-19 in 2020, it is the worst month of May recorded by the ACEA, and the eleventh month in a row of decline in the automotive market that the European continent is experiencing.

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The phenomenon is global: in May, sales fell by 13% in China and 30% in the United States. According to forecasts by specialist firm S&P Global Mobility (formerly IHS Markit), 80 million vehicles should leave factories worldwide in 2022, compared to 89 million in 2019. For Europe (including the United Kingdom and Turkey), the difference would be even more marked: 15.5 million cars sold in 2022, compared to 19.2 million three years ago.

A supply problem

At the origin of this massive drying up of the market is above all a problem of supply. Manufacturers simply can’t produce the cars their customers order. Several shortages are the cause of this unprecedented situation. To begin with, there was this sudden shortage of semiconductors, which appeared after nine months of the pandemic, which caused a drop in production which peaked in September 2021.

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Then the war in Ukraine disrupted the cabling industry, which is very present in this low-wage country. Wiring is fundamental for the modern automobile, a vehicle today contains three kilometers of it. Finally, there was a global disorganization of the supply chain, mainly due to the confinement of Shanghai.

“New threats are popping up everywhere: on palladium, on small analog chips, on plastics, on neo, or on natural gas”, Denis Schemoul, Director at S&P Global Mobility

“The automobile industry now operates under a rationing economy, summarizes Denis Schemoul, Director at S&P Global Mobility. This is improving at the moment in the field of wiring and the production of electronic chips for microcomputers. But new threats arise from all sides: on palladium, necessary for catalytic converters; on small analog chips, which are everywhere in vehicles; on plastics, due to the Russian oil embargo; on neon, a gas essential for the production of semi-conductors, which Russia is threatening to block; or quite simply on natural gas, which provides energy to many factories. »

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