THE AUTO PARTS SHORTAGE: CAUSES, SOLUTIONS AND FUTURE IMPLICATIONS
For consumers, maintaining their cars is necessary to ensure their longevity and reliability. However, with the auto parts shortage that has hit the nation, it has become increasingly difficult to find the necessary components to keep their cars running smoothly, from individual car owners to dealerships, independent shops, and technicians.
Major concern
The parts shortage has been a major concern for the auto industry. The shortage has been caused by a combination of factors, including supply chain disruptions, labour shortages, shipping delays and the COVID-19 pandemic. The pandemic resulted in shipping delays, as many ports and shipping channels grew congested due to increased demand for goods. The shortage has been felt across the country, with many dealerships and repair shops struggling to obtain the necessary parts to service their customers.
The shortage has been particularly acute for certain types of parts, such as microchips and other electronic components. These parts are essential for modern vehicles, and their scarcity has resulted in national back orders for parts. Additionally, the shortage has led to price increases for both new and used car parts, making it more difficult for car owners to afford necessary repairs.
The global shortage of semi-conductors became apparent during the first quarter of 2021 with some experts expecting it to last beyond 2022 and into 2023. As a result, this had a knock-on effect on customer experience, where speed is of the essence for short claim lifecycles and quick repairs.
Another factor contributing to the parts shortage has been the increased demand for vehicles in the post-pandemic world. As people have returned to work and resumed their normal activities, the demand for vehicles has increased, leading to a surge in sales. This increased demand has put pressure on the supply of auto parts, making it more difficult to obtain the necessary components for repairs and maintenance.
Global parts shortage
As cars have almost literally become smartphones on wheels, semi-conductors have become increasingly critical for a variety of applications, from fuel-pressure sensors to digital speedometers and artificial intelligence-driven tools that assist with parking, finding the next fuel station, or alerting the driver when an oil change is needed.
Without these semi-conductor chips, the auto industry’s post-pandemic recovery has stalled, as manufacturers have been unable to complete orders. By some estimates, the impact on global production volumes is expected to be about seven- to eight million units, and McKinsey report that major carmakers have already announced significant rollbacks in their production due to chip shortages, lowering expected revenue for 2021 by billions of dollars.
Despite gradually recovering from the impact of the global coronavirus, small and medium-sized enterprises (SMEs) are no closer to feeling comfortable about their business outgoings, with a fear that costs are constantly on the rise. This is because previously, many manufacturers had advocated a JIT (just in time) manufacturing approach, which works exceptionally well when all products are in good supply. But when the supply of even just one component is affected, the consequences are then felt throughout the entire supply chain. In other words, businesses are left with no choice but to plan for a JIC (just in case) approach instead, in order to mitigate any potential challenges. These are:
Alternative options
In the face of the parts shortage, vehicle owners and shop owners have had to explore alternative options to obtain the necessary components for repairs. One option is to purchase used car parts, which can often be obtained at a lower cost than new parts. However, it is important to ensure that the used parts are in good condition and will function properly in the vehicle.
Another option is to purchase aftermarket parts. Refurbished parts are also an option. This can be a cost-effective way to obtain the necessary components for the car, but it is important to ensure that the refurbished parts are of high quality and will function properly.
Repairs and maintenance
The parts shortage has had a significant impact on vehicle owners, as it has made it more difficult to obtain the necessary components for repairs and maintenance. This has resulted in longer wait times for repairs and higher costs for both new and used car parts. In some cases, the shortage has also led to delays in vehicle production, as manufacturers struggle to obtain the necessary components to build new cars.
The shortage has also made it more difficult for vehicle owners to sell their cars, as potential buyers may be hesitant to purchase vehicles that may be difficult to repair due to the shortage of parts. Additionally, the shortage has made it more difficult for dealerships and repair shops to service their customers, leading to frustration and dissatisfaction among vehicle owners.
In the face of the parts shortage, vehicle owners need to take steps to maintain their cars and prevent the need for costly repairs. Regular maintenance, such as oil changes and tyre rotations, can help prevent damage to their vehicle and extend its lifespan. Additionally, it is important to address any issues with the car as soon as they arise – before they become more serious and require even more expensive repairs.
It is also important to be proactive in obtaining the necessary parts for the vehicle. This may involve researching alternative options, such as used or aftermarket parts, and being willing to wait for the necessary components to become available. It may also involve working with a trusted technician who can help them navigate the shortage and obtain the necessary components for their car.
For those who are comfortable with car repairs and maintenance, DIY repairs can be a cost-effective way to keep their vehicle running smoothly during the parts shortage. However, there is no substitute for a professional, trained, and certified shop when it comes to repairing vehicles safely to pre-accident condition while maintaining the car’s value.
Petrol and diesel fuel duty
The cost-of-living crisis, exacerbated by the war in Ukraine, has sent an unforeseen shock through the global oil market, causing wholesale prices to quadruple in the last year.
This extreme pressure on the UK economy has led the new government to help households and business by announcing an immediate measure as part of the spring statement; that there will be a cut in fuel duty.
However, whilst the Chancellor’s decision has been broadly welcomed by fleets, many have questioned whether he went far enough, highlighting that this only takes prices back to where they were a week ago.
Paul Hollick, chair, Association of Fleet Professionals (AFP), said: “literally every part of the cost equation that goes into operating cars and vans are facing substantial rises, and while the Chancellor has taken some actions that will serve to offer some mitigation, such as the reduction in fuel duty, none of these will really alter the overall direction of travel.”
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), commented further, saying “measures to help address the accelerating cost of living are welcome but business also needs support, especially on energy, investment and skills… time is of the essence as the industry is not yet in recovery, but costs are increasing rapidly, undermining UK competitiveness.” But rising fuel costs are not just limited to petrol and diesel.
Energy cost hike
Businesses and households alike have experienced the recent surge in energy prices, skyrocketing gas, and electric bills to astonishingly high prices. According to Ofgem, the price cap is to increase by £693 making this a record increase in global gas prices of 54%.
These soaring energy costs are leaving some small businesses ‘terrified’ about the future with the potential for bills to rocket by thousands of pounds this year, as highlighted in This Is Money.
Business energy is also different to domestic too, with fixed-price contracts commonly in place for one, two or three years. Business energy tariffs also don’t come with a price cap like standard variable deals do, meaning the prices can be huge and damaging for small-medium sized organisations.
Solutions
The parts shortage has highlighted the need for solutions to address the challenges facing the auto industry.
One such potential solution is to invest in the domestic manufacturing of parts, reducing our reliance on international supply chains and increasing the availability of necessary components. Furthermore, an increased investment in the research and development of alternative materials and components could help reduce the impact of future supply chain disruptions.
Yet another potential solution is to increase collaboration between manufacturers, dealerships, and repair shops to better manage the supply and demand for parts. This could involve sharing data and information on inventory levels and demand in addition to exploring alternative options for parts.
In the face of the shortage, shops and vehicle owners need to explore alternative options for parts, such as used or aftermarket parts, and to encourage consumers to be proactive in maintaining their vehicles to prevent the need for costly repairs. Additionally, increased investment in domestic manufacturing and collaboration within the industry could help address the challenges facing the automotive industry and ensure that necessary parts are available to all who need them. By taking these steps, vehicle owners can keep their cars running smoothly, and both shops and consumers can prevent the parts shortage from having a significant impact on their lives and businesses.
How can repairers protect their businesses during uncertain times?
Being able to keep customers updated and making them aware of what they can expect from the get-go, can transform the overall claims experience in turbulent times.
But that’s not all…
By constantly updating data points to ensure that the entire supply chain has the most precise data, always. For example, new vehicle models are added bi-weekly to our OEM prices, with data being updated daily in our solution. This helps us to offer an accurate 96-98% car parc coverage, making our system a highly reliable tool for a claims department.
By Joe Keene
