GM production resurgence indicating stronger chip supply in 2022?
- GM said improved chip supply had bolstered sales volumes while tight inventories across the industry boosted prices on crossovers and pickups.
- For the auto giant’s first-quarter profit, GM beat analysts’ estimates, despite reporting a decrease in their numbers.
- Deloitte suggests that the global chip industry will grow 10% in 2022 to over US$600 billion for the first time ever, but shortages and supply chain issues would remain central.
Although the worst is over for most parts of the world when it comes to the pandemic, the global economy would inevitably take its time to recover. The consensus among analysts at this juncture is that the semiconductor pipeline remains fragile, after over two years of battling with spiked demand and severe shortages. For US auto giant General Motors though, the chip crisis appears to be over. Production is mostly back to normal for the GM and it expects stronger chip supply in the second half of the year.
GM’s CEO Mary Barra during a media call admitted that while “There’s still volatility in chips”, there has been an improvement in semiconductor availability compared to late 2021. “We’ll see stronger chip supply in the second half of the year. We still believe that we’ll be able to make 25-30% more vehicles this year than last year,” according to Bloomberg’s report.
For the auto giant’s first-quarter profit, GM beat analysts’ estimates, despite reporting a decrease in their numbers. GM also reaffirmed its guidance for the year–a move that signals a lingering shortage of semiconductors is starting to fade. For context, net income in the first quarter dipped 3% to US$2.9 billion on an 11% jump in revenue to US$36 billion.
To top it off, auto deliveries for GM actually declined in all its operating regions in the wake of supply chain shortages, especially a crunch of semiconductors that has curtailed production intermittently at some factories. A tight vehicle inventories have allowed GM to lift prices, especially on popular trucks and crossover vehicles, the company said.
According to data from Edmunds.com, among GM vehicles, the Chevrolet Silverado averaged US$51,240 during the quarter, while the GMC Canyon went for US$41,660. Both vehicles were up more than 9% compared with 2020. The company also said they have not seen evidence rising inflation and interest rates are preventing sales overall. “We continue to see a strong pricing opportunity because there is strong demand for our product,” Barra said during the conference call.
In a letter to their shareholders, Barra also noted that they are reaffirming the company’s financial guidance for the calendar year. “With strong demand for our vehicles, including our dramatically redesigned Chevrolet and GMC light-duty pickups launching now, our cost discipline and the progress of our growth plan, we are reaffirming our financial guidance for the calendar year.”
GM production and global chip outlook
In November last year, GM said it was working on a solution to its semiconductor chip problem. The automaker is apparently collaborating seven chip supplier partners on new designs of chips that would be capable of handling more than the current chips and would be made in North America, according to GM President Mark Reuss.
When it comes to electric vehicles(EVs)–a space it rapidly pivoted to recently–GM is working on having six new EVs off its Ultium battery platform for sale by the end of next year. Crucial to that are what Barra called “affordable EVs” such as the upcoming all-electric small Chevy Blazer SS SUV and US$30,000 Chevy Equinox crossover EV, both of which are due around mid-2023.
Another part of that plan, as Bloomberg highlighted, involves the rebooting sales of the Chevy Bolt EV after a production halt last year stemming from a battery-fire risk recall. The seven suppliers GM is working with are: Qualcomm, STM, STSMC, Renaissance, On Semi, NXP and Infineon, Reuss said.
Industry wide, Deloitte’s latest outlook report suggests that the global chip industry will grow 10% in 2022 to over US$600 billion for the first time ever. “Chips will be even more important across all industries, driven by increasing semiconductor content in everything from cars to appliances to factories, in addition to the usual suspects—computers, data centers, and phones,” it said.
Deloitte however isn’t as optimistic as GM as the former expects shortages and supply chain issues to remain front and center for the first half of the year. “Hopefully easing by the back half, but with longer lead times for some components stretching into 2023, possibly well into 2023,” the report highlighted.
9 December 2022
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