GM Chip Shortage Update: Supplies Are Expected to Normalize in 2022

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Feb. 3 2022, Published 9:12 a.m. ET

Overall, 2021 was a watershed year for the U.S. automotive industry. General Motors (GM), which has been the largest automaker in the country since 1931, lost the position to Japanese rival Toyota Motors. The chip shortage situation took a toll on GM’s production in 2021. What’s the latest update on GM’s chip shortage situation and are supplies expected to get better in 2022?

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GM sold 2.218 million vehicles in the U.S. in 2021. The company’s deliveries fell 13 percent in the year to the lowest level since 2010. The total U.S. car sales also fell to around 15 million units in 2021.

GM expects U.S. car sales to rise in 2022.

GM expects U.S. car sales to rise to almost 16 million in 2022. The company expects its volumes to increase between 25 percent and 30 percent in 2022. GM clarified during the earnings call that the increase would be across its global production, including in North America.

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GM also said that most of the production increase would come in the second half of 2022 mainly due to the base year effect. While Ford saw its chip supply situation improve in the back half of 2021, GM faced several headwinds and its production tumbled in the second half of 2021. GM's U.S. sales fell 43 percent YoY in the fourth quarter of 2021.

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General Motors prioritized high margin models due to the chip shortage.

While GM faced chip shortages in 2021, it prioritized high-margin models over wholesale sales. Going forward, the company will prioritize SUVs and trucks along with electric models. GM has set an ambitious target of selling 400,000 electric cars between 2022 and 2023.

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GM expects to ramp up its EV production capacity to 1 million units by 2025. The company also became the first Detroit automaker to commit itself to a zero-emission future and expects to sell only zero-emission vehicles by 2035.

GM expects the chip shortage situation to improve in 2022.

The question of the chip shortage took center stage during GM’s earnings call for the fourth quarter of 2021, especially since the company has projected strong production growth for 2022.

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Commenting on the chip supply situation, GM CEO Mary Barra said that the company is seeing an incremental improvement in the chip supply in the first quarter compared to the fourth quarter. She also said that the chip supply situation improved incrementally in the fourth quarter.

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GM CFO Paul Jacobson said during the earnings call that the chip supply environment is “stabilizing” and he expects the situation to improve throughout the year. Barra said that she expects the semiconductor shortage crunch to “diminish” in the back half of 2022.

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How do Ford and GM compare on the chip supply situation?

Ford hasn't released its earnings for the fourth quarter of 2021. Previously, Ford said that it expects the chip shortage to extend into 2023 as well. However, it might update markets on its chip supply situation when it releases the earnings on Feb. 3 after the markets close.

Ford and GM are investing aggressively in electric and autonomous vehicles. They're willing to sacrifice short-term profits for the long-term potential of EV vehicles. Ford has reinstated its dividend, which it suspended in 2020. GM is prioritizing EV investments over shareholder payouts.

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