The pandemic affected everyone worldwide, sometimes in surprising ways. One such case is causing a significant dilemma in the auto industry. Car manufacturers are scrambling to meet consumer demand as the production of vehicles is forced to slow. In some cases, it has come to a halt periodically. The culprit is a shortage of semiconductor chips. Yet somehow Hyundai seems unscathed as the automaker’s sales see a hot streak.
How has the semiconductor chip shortage affected the auto industry?
During the pandemic, there was a slowdown in overseas chip factories. Chips were invented in the United States, but today, more than 80 percent are manufactured in Japan, China, and other overseas countries, Time reports. Taiwan has the largest demand for the complex chips that modern technology requires. Unfortunately, semiconductor chip factories slowed their production due to COVID-19 capacity restrictions.
In addition, the car industry made shortsighted errors. 2020 hit the car industry hard. The demand for new cars dropped. In turn, manufacturers placed fewer orders for chips. The need for chips was still high as consumer demand for other electronics rose. For example, school districts had to supply students with tablets and computers, raising the demand for chips in that industry.
When the demand for cars bounced back in the fall, the car industry was unprepared. There weren’t enough chips to fill their orders, and they couldn’t simply order more chips. Semiconductor chips take months to create. Lawmakers recognized the problem and have pumped $52 billion in funding to increase production and fund research. The crisis will not be a quick fix.
There is fear that the car chip crisis will extend over into other consumer products. This could mean a shortage of electronics such as gaming consoles, cell phones, and more. Not only is this an inconvenience, but it will also have an economic effect if companies can’t manufacture items to sell. Market analysts are particularly concerned about the impact the shortage will have on Christmas sales this year.
But Hyundai seems unscathed by the chip shortage
While huge players in the car market are taking hits, Hyundai announced it ended May 2021 with a 56 percent sales increase over May 2020, setting a company sales record. Meanwhile, Ford estimates its 2021 losses will range between $1 billion and $2.5 billion. Industry-wide, experts expect car manufacturers will take a $110 billion loss. Efforts are underway to find alternatives to the problem, yet Hyundai seems to already be on the right track.
There’s speculation that Hyundai foresaw the chip shortage and stockpiled them. This could explain the automaker’s relative success in handling the situation, but it is not the whole story.
According to a Hyundai sales chief, Randy Parker, the company’s game plan focuses on the cars that sell best. The Hyundai Elantra, Tucson, and Santa Fe are the brand’s biggest-selling models, so the company focused on producing these models.
Despite the current success, Hyundai temporarily shut down production in April and expects lean inventory this summer. Yet there’s no denying the automaker is faring better than some competitors.
Why Hyundai’s best-sellers are popular
Hyundai is known for manufacturing high-quality vehicles at competitive price points. The Hyundai Tucson is a consistent best-seller for the South Korean manufacturer. The reasons are simple. The compact crossover delivers power and efficiency at a competitive price. The sleek SUV also has hybrid options for eco-conscious consumers.
Meanwhile, the Hyundai Sante Fe is another best-selling crossover. The Insurance Institute for Highway Safety awarded this midsize SUV a Top Safety Pick award. This model offers modern design, cutting-edge technology, and a powerful engine.
The Hyundai Elantra isn’t an SUV, but the compact sedan earns a spot on the best-seller list. This dependable compact car is known for its dependability as much as its affordability. At the 2012 North American International Road Show, the Elantra even won Car of the Year.