Ford Chip Shortage Update: Will Things Get Better in 2022?
Ford is among the worst affected companies due to the chip shortage. What’s the latest update on Ford’s chip supply and will things get better in 2022?
Feb. 1 2022, Published 9:10 a.m. ET
The global automotive industry has been grappling with a severe chip shortage. All automakers have faced some sort of production issues due to the global chip shortage. Ford has arguably been among the worst affected companies due to the chip shortage situation. What’s the latest update on Ford’s chip supply situation and will things get better in 2022?
According to estimates, the global automotive industry lost more than $200 billion in sales in 2021 due to the chip shortage. Apart from the automotive sector, the smartphone and white goods industry was among the worst affected.
Ford’s sales fell in 2021 due to the chip shortage.
Ford sold around 1.9 million vehicles in 2021 in the U.S., which was 6.8 percent lower than in 2020. The company has been prioritizing SUVs and electric models over sedans. Its SUV sales increased 10.4 percent YoY in 2021.
Ford became the largest-selling automaker in the U.S. in the fourth quarter. In EVs, Ford captured the second spot behind Tesla. However, there's a wide gulf between the companies' EV sales.
Despite the chip shortage situation, Tesla reported record deliveries in 2021. The company expects its deliveries to rise more than 50 percent in 2022 as well. However, Tesla has been feeling the pinch from the chip shortage. Elon Musk's company pushed back the timeline for new vehicles to 2023, including the Cybertruck, which will compete with Ford’s F-150.
Ford will now have the first-mover advantage in electric pick-up models. The company’s Ford F-150 has been America’s best-selling pick-up for 45 years in a row. The all-electric model is also getting a good response and Ford closed the orders after the initial 200,000 vehicles.
The chip supply situation has been fluid.
The chip supply situation has been fluid. During the earnings call for the first quarter of 2021, Ford said that it expects to lose 1.1 million wholesale units in 2021 due to the chip shortage, while the impact on pre-tax profits was pegged at $2.5 billion.
However, the situation didn't turn out to be as dire as the company forecasted during that earnings call. During the earnings call for the second quarter, Ford said that the chip shortage impact in the second quarter was less severe than it projected. Ford also said that the chip shortage situation continued to improve in the third quarter.
Ford increased the full-year EBIT guidance to between $9 billion and $10 billion, which was significantly higher than the previous guidance. During the earnings call for the second quarter of 2021, Ford CFO John Lawler said that he expects the chip shortage to continue in 2021 and the first half of 2022.
Ford provided an update on the chip shortage situation.
In Ford's earnings call for the third quarter of 2021, Lawler said that the chip supply situation remains “dynamic.” He said that the shortage would run into 2022 and also extend to 2023. However, he said that the severity would come down in 2023 compared to 2022. He also said that the chip supply improved less than expected in the second half of 2021.
Ford’s production is still being impacted.
Ford’s production continues to be impacted by the chip shortage. Earlier in January, Ford had to take downtime at its Flat Rock assembly plant due to the chip shortage. We'll hear from Ford's management on Feb. 3 when the company releases the earnings for the fourth quarter of 2021.
Management is expected to provide more updates on the chip shortage situation. Similar to the last few quarters, the chip shortage will be among the key discussion points during the earnings call.