UAE automotive market braces for global supply shortfall of 3.9mln units

Some of the leading car dealers in the UAE are preparing to weather the impending shortage in supplies due to an estimated net production loss of 3.9mln vehicle units worldwide in 2021

Image used for illustrative purpose.

Image used for illustrative purpose.

REUTERS/Anwar Mirza

A world-wide semiconductor shortage that costs global automakers $110 billion in production revenues in 2021 is expected to have a major impact on car exports to the UAE and other GCC countries, leading to supply strains and price spikes.

Some of the leading car dealers in the UAE are preparing to weather the impending shortage in supplies due to an estimated net production loss of 3.9 million vehicle units worldwide in 2021.

AlixPartners, a global consulting firm, said companies need to be ‘proactive’ right now, and create ‘supply-chain resiliency’ longer term in order to circumvent the supply shortfall.

“The pandemic-induced chip crisis has been exacerbated by events that are normally just bumps in the road for the auto industry, such as a fire in a key chip-making fabrication plant, severe weather in Texas and a drought in Taiwan,” said Alessandro Missaglia, managing director, AlixPartners Middle East.

A spokesperson of Toyota Middle East, said the Japanese car maker works together with its suppliers to carefully check the supply system, inventory status, and logistics for each individual part across the entire supply chain on a daily basis.

“This enables us to remain agile and adapt to changing circumstances to deliver quality products that exceed customer expectations.” However, the Toyota official ruled out any immediate impact of the production shortage on prices.

“We don’t believe we will see any spike in prices for Toyota and Lexus vehicles as a result of this issue. Our distributors carry a healthy stock of inventory and our diverse line-up of vehicles is more than capable of meeting the needs of our customers across a wide range of segments.”

Axel Dreyer, chief executive officer — Automotive Division, Galadari Automobiles, ruled out any immediate effect of this phenomenon on the performance of car sales, in particular Mazda. Albeit, “the production output in the upcoming month will be reduced due to the worldwide semiconductor shortage and we will have a shortage of cars if the market continues to perform well.”

Dreyer, however, said the shortage of car inventory is not leading to a spike in car prices. “The increase in car prices is not connected to the semiconductor issue. There is, unfortunately, a sharp increase of nearly all commodities starting from steel, plastic, base oil and many more that is heavily affecting the production cost of the cars worldwide. Therefore many manufacturers will be forced to increase their prices in near future,” said Dreyer.

Toyota spokesperson added that in line with its ‘customer first’ policy, the automaker would continue to do our best to avoid any inconvenience to those who are waiting for their vehicles.

Dreyer said regardless of the worldwide semiconductor and supply issues, Mazda had an excellent start in 2021 with volumes ahead of 2020. “Especially the new Mazda 3 and CX-30 have been in high demand but also our SUV bestsellers CX-5 and CX-9 performed above expectations.”

“The market remains very volatile so it is difficult to predict a market forecast. We at Galadari Automobiles remain very optimistic as the government leaders are continuously launching initiatives to attract new businesses to come to UAE. Also, Expo 2020 will accelerate the economy and the demand for vehicles will increase,” said Dreyer.

Missaglia explained that there are up to 1,400 chips in a typical vehicle, and that number is only going to increase as the industry continues its march toward electric vehicles, ever-more connected vehicles and, eventually, autonomous vehicles. “So, this really is a critical issue for the industry. Companies are currently focused on mitigating the short-term effects of disruption, which opens up an opportunity for long-term large-size investors to enter and position themselves in the segment.”

He said most GCC countries aim to improve the volumes and quality standards of locally made goods and grow their export market’s value. “The high-tech industry is a clear area of opportunity for establishing international industry hubs, with the additional upside of attracting talent and investment from overseas.”


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