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Microchip shortage forces more car production cuts in 2023

Capacity at semiconductor fabrication plants that make chips favored by the auto industry is expected to rise about 20 percent next year, said Dan Hearsch, managing director at AlixPartners. However, since automakers will look to meet pent-up demand from the last two years and because the number of microchips per vehicle is rising, that doesn’t mean the industry will be “flush with chips” and be able to make all the vehicles they want, he said.

“We still expect constraints next year on automakers being able to make all of the systems and accessories and heated seats and everything else that are increasing the number of devices that go into the car,” he said.

The microchip outlook could change in part because of a potential recession in 2023, which is “the darkest shadow on the future,” Fiorani said.

Automakers have generally allocated more semiconductors to higher-margin, more-expensive vehicles at the expense of lower-cost models, sending the average transaction price of new vehicles soaring over the last two years. If the economy were to enter a recession, automakers might have to rethink that strategy, Fiorani said.

The industry’s current approach “is taking a bunch of buyers out of the loop,” he said. “Having vehicles under $30,000 available would bring a lot of models back in and potentially stir the industry and the economy.”

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