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Major revision for global light vehicle production forecast – what it means for OEMs’ technology deployment

The latest September revision of the global light vehicle production forecast following the semiconductor shortage issue will see this impact filter through IHS Markit's component forecasts. This article highlights the fitments of features and technologies that are expected to be affected and the extent of the impact.

The IHS Markit light vehicle production forecast has been cut by 6.2% or 5.02 million units in 2021, and by 9.3% or 8.45 million units in 2022, to stand at 75.8 million units and 82.6 million units, respectively. For 2023, we have reduced the forecast by 1.05 million units or 1.1% to 92 million units; this is a frontloaded adjustment and from the second quarter output levels are expected to be able to accelerate as supply chains return to normal. If this is the case then strong pent-up demand and the pressure to rebuild stock levels is expected to support elevated levels of production in 2024 and 2025, with 2024 now forecast to hit 97.3 million units, up .2% compared to the previous forecast and 2025 forecast at 98.9 million units, an increase of 2.4%.

If the first half of the year was defined by front-end issues disrupting automotive microcontrollers (MCUs), then the second half of the year and the coming months is increasingly defined by back-end issues affecting all semiconductor end markets and not just automotive. This wider disruption is contributing to the reduced expectations for 2021 and 2022, signaling that even without further external shocks, levels of capacity dedicated to automotive will remain below those required to meet ongoing demand and well below what would be required to allow stock levels to be rebuilt. Ongoing imbalances between supply and demand of semiconductors are to be expected.

The full release on the latest vehicle production forecast revision can be found here. Please follow AutoInsight for the latest information regarding the impact of supply constraints on vehicle production.

The latest September revision will see this impact filter through IHS Markit's component forecasts in Component Forecast Analytics (CFA) and in Feature and Technology Benchmarking (FTB) across AutoTechInsight. These are some of the highlights you can expect to see in the latest revision:

Significant downgrade for the following features and technologies:

  • Head-up displays (HUDs)
  • 360-degree parking

Medium downgrade:

  • Camera sensors
  • Traditional displays (center stack, instrument cluster, rear seat entertainment)
  • Headunits, in particular those supporting OEM navigation
  • Adaptive driving beam (ADB) headlights
  • High-end sound systems

Marginal downgrade:

  • Telematics
  • Vehicle-to-everything (V2X) communication

Other implications we have observed:

  • Trim variety wanes on dealer lots: New car buyers are increasingly discovering that in many cases, the vehicles available at their dealerships are offering limited trim variants due to delays in sourcing optional technology content. Examples include but are not limited to the likes of Mercedes, Acura, Ford, Nissan, Honda, Infiniti, Volvo, Stellantis, and others. Reasons for an individual case of limited trim offerings vary, but in many cases the squeeze comes from advanced driver assistance systems (ADAS) or in-vehicle infotainment features. For example, the delivery date of some Volvo vehicles in Europe is adjusted based on whether the vehicle comes with an option 360-degree parking camera. Some OEMs that have a technology contenting strategy heavily driven by trim level like Ford and Honda have created new low-end trims on some high-volume vehicles that allow them to minimize delivery delays by removing some features heavily exposed to the semiconductor shortage. These trims have basic contenting relative to the price point, for example they might not feature climate control, voice activation, Bluetooth, high beam assist, and virtually no ADAS feature. Another strategy OEMs have pursued is to remove some specific features on basic trims, such as switching from digital instrument cluster to analog gauges or as Mercedes has done on its EQA via downgrading headlamps from multibeam LED to base LED headlamps. Other examples include some OEMs providing one key fob rather than two with the promise to deliver the second at a later point or even not fitting a part altogether and offering a rebate, as seen with in-vehicle charging mats. The impact to IHS Markit data is a short-term bias against higher spec, optional technology and features in our forecasts as previously outlined.

  • Connected car tech developments hit a pause: Global automakers such as General Motors (GM), Nissan, and Renault have already paused some of their vehicle production plans and technology innovations. The Chevrolet Silverado is one of the models that will lack a planned HD Radio feature due to chip shortage. Japanese carmaker Nissan was shipping thousands of vehicles without navigation systems that were meant to come as standard, simply because it does not have the components and cannot afford to keep them sitting in a parking lot. Additionally, Renault has removed an oversized digital screen from the steering wheel of its Arkana SUV models to save on chips. The chip shortage has also impacted telematics technologies, as fleet customers find it challenging to acquire necessary telematics hardware. While this has been felt more strongly on the aftermarket side, if the semiconductor supply constraints are not resolved soon, it can also affect upcoming 5G-based telematics systems for OEM-installed applications.

  • Are electric vehicles (EVs) less affected? IHS Markit has gathered anecdotal evidence that EVs still seem to be associated with delivery times that are in line or even shorter than their internal combustion engine (ICE) equivalent or vehicles positioned in a similar segment. For example, Mercedes EQC, a recently launched EV, has a two-month delivery time, while a GLC, which features a traditional powertrain, has five months. Although this is not a pattern observed with all OEMs and certain factors—available inventory during chip shortage disruption or when OEMs prioritize certain vehicle categories—could affect this, it is nonetheless counterintuitive that EVs are not among the most affected vehicle segments, given the substantially higher semiconductor content that these vehicles have, some with even three times as much in the powertrain domain alone. Some public statements from the likes of Stellantis on their strategy to actively prioritize EV production rather than their ICE-counterparts certainly adds weight to the anecdotal evidence we have gathered, signaling that EV production might become more in vogue across the board.

  • OEMs start to reinvent their chip supply to prioritize supply assurance over cost: Until 2020, the firm order window for automotive chips was 12 weeks, which is shorter than the typical 14-16 weeks required to fabricate a chip. Since the second quarter of 2021, the firm order window has now been extended to at least 12 months to provide more visibility to semiconductor suppliers. OEMs have revisited their inventory-related policies to provide a buffer in the event of short- and medium-term disruptions. OEMs are even reportedly exploring booking capacity at tier-2 foundries such as TSMC or GlobalFoundries over a year in advance, a move that is in stark contrast with previous practices. Finally, IHS Markit expects OEMs to learn from the danger of concentrating chip wafer fabrication (front-end) and chip packaging and testing (back-end) regionally and with limited suppliers. This approach has been cost effective over the past decade, but it is susceptible to local disruption being felt globally, such as the COVID-19 lockdown in Malaysia that has been impacting the chip assembly with major disruption to vehicle production.

  • Software content revisited in light of semiconductor shortages to mitigate short-term launch issues: In modern vehicles, software content is intrinsically linked to hardware and vehicle trim definition. Many OEMs are now revisiting vehicle feature content and adopting two key strategies to mitigate the short-term vehicle launch issues. Firstly, by removing the supplementary nice-to-have features that will not influence the product launch and keeping must-have features to deliver the vehicle to a customer per committed time frame, i.e., a truck can be manufactured without cylinder deactivation control. Secondly, by allowing for a recall arrangement within the sales contract to upgrade the vehicle to the original request, i.e., retrofit the cylinder deactivation control at a later date when chipsets are available. By adopting such a strategy, one North American OEM managed to resolve 9% of its truck sales during the second quarter of 2021.

  • Widely deployed camera sensors suffer most among autonomy sensors: The wide and often dense fitment of camera sensors today has suffered the biggest impact from a reduced short-term vehicle volume outlook. Despite strong annual net unit growth of approximately 30 million cameras in 2021 and 2022, the decline in vehicle volumes was stronger than growth in new fitment and increased technology penetration—even before the largest decrease in light vehicle volumes in the latest September outlook. Based on August light vehicle volumes, analysts removed 4.8 million units of camera sensor volume in 2021 and 1.3 million units in 2022 (relative to the Autonomy second quarter 2021 outlook). The strongest shock yet to light vehicle volumes will have a material impact in the fourth quarter Autonomy Forecast update, but analysts maintain a very positive outlook for camera sensors over the long term. Radar and lidar sensors both take a hit to their growth rate with this vehicle forecast downgrade, but both remain in positive growth territory.

  • The rise of dealer installation: Dealer installed technology components such as headunits, audio systems, and display systems have traditionally been a uniquely Japanese approach to the market, with as many as 15% of new vehicles sold in Japan offering these selections for customers at point-of-purchase. Ongoing supply chain constraints are starting to signal that this may become more commonplace, most notably with the Volkswagen Lavida in Mainland China moving this direction to avoid any possible delays to its 300,000-400,000 annual unit sales. In IHS Markit data, this trend will be reflected by more "None" and "Not Applicable" field entries as post-production installation is not considered.

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The above article is from AutoTechInsight by IHS Markit. AutoTechInsight provides a wealth of original thought leadership, data, and analysis on a broad spectrum of automotive industry topics and sectors. Visit AutoTechInsight to view all our offerings.

Posted 07 October 2021 by Brian Rhodes, Research and Analysis Manager, Connected Car & Vehicle Experience, IHS Markit and

Jeremy Carlson, Principal Analyst, Autonomy, Automotive, IHS Markit and

Matteo Fini, Vice President, Automotive Supply Chain, Technology and Aftermarket, IHS Markit and

Sascha Klapper, Lead Analyst, Exterior Lighting & Interior Comfort, IHS Markit

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