this disaster scenario threatens even the end of the semiconductor crisis

The end of abundance … Emmanuel Macron’s statement to the French can also be very loud in the ears of car manufacturers. While the latter published poor financial results in the first half, the landing may be more brutal than expected. The Covid crisis certainly shook the car industry, before it was interrupted by a shortage of semiconductors. But the founders were able to pass these difficult years with enough confidence, playing sometimes with partial unemployment, sometimes with an ultra-flexible productive equipment, or by taking advantage of a favorable no balance between supply and demand to set their prices. So far everything was going well, until the Russian invasion of Ukraine in January. At this time, the running prices of raw materials, and especially those of energy, changed the situation with a worrying butterfly effect.

A disrupted macroeconomic picture

Because this summer, the macroeconomic picture has completely and suddenly changed in nature compared to what was expected at the beginning of the year: inflation of 9% (record since the creation of the euro), the first increase in interest rates since a decade to be followed by three more before the end of the year, deterioration in all leading indicators of consumer and industry confidence. The forecast of an automotive market increase of 8% (from ACEA) in the year no longer holds.

“The semiconductor crisis is now just one of the elements that trigger a risk of market decline in a context of rising prices and falling consumer confidence. Especially since the negative evolution of euro against the dollar is likely to increase the cost of vehicles,” explained Guillaume Crunelle, associate director of Deloitte and specialist in the automotive industry.

For car manufacturers, this deterioration in the macroeconomic context comes at the worst time, namely the tightening of European regulation around CO2 emissions. But electric cars are getting more and more expensive. And they are at risk of more than just bad exchange rate effects due to the fact that most batteries are imported. Not to mention the interest rates which are on an upward trend, but still remain at a very low level.

The Semiconductor Shortage Is Over

At PwC, we agree on the fact that the semiconductor crisis will soon be a non-issue. ” The shortage of semi-conductors is about to be absorbed. There is still a shortage of supplies in the third quarter, but we do not expect any shortages in the fourth quarter. “, explained José Baghdad, partner in charge of the automotive sector at PwC France and the Maghreb.

However, the inflationary context is worth changing: “ Inflationary pressures in the automotive industry have become decorrelated from inflation from a macroeconomic point of view and are lower than a few months ago. There are even price reductions on some materials “.

The Semiconductor Shortage Looks Like It’s Closing: Why That Isn’t Necessarily Good News

Germany is highly exposed to power cuts

But for José Baghdad, the real danger is expected this winter with the conditions of gas supply in Europe. ” Germany is the country most exposed to this risk, and we estimate a reduction in production of 1.5 million cars in the last quarter, which could be repeated in the first quarter of 2023 if the situation continues. », PwC expert explained.

In other words, if Vladimir Putin cuts gas to Europe (35% of German imports, 55% before the conflict in Ukraine), German car factories literally risk having their electricity cut off. For comparison, the impact of the shortage of semiconductors in Europe in 2022 represents approximately 660,000 cars. The winter promises to be very long for German car manufacturers.

These pressures on energy prices are also likely to weigh on the electric car market. ” The sharp rise in electricity prices undermines the argument that the electric kilometer is cheaper than a thermal car. This is an additional difficulty for manufacturers who are strongly encouraged to sell more to regulators. “said Guillaume Crunelle.

“The rise in fuel prices is not necessarily in favor of the electric car”

But this catastrophic scenario is still in the hypothesis stage. Less so is the severe deterioration in household and industrial confidence, which is already real. In France, consumer confidence indicators have not been so low since 2013. But so far, the impact has not been assessed. There is one macroeconomic point that remains clear in the behavior of consumers whose confidence rating has fallen. At the moment, the effect of a reduction in demand is ensured thanks to a strong order book that may be possible to continue for several months. looking at José Baghdad.

Chinese manufacturers lay in ambush

“LHe questions how long manufacturers will continue to benefit from orders placed during the semiconductor shortage. On top of that, there is a risk of reduced demand “Judge Guillaume Crunelle, is more concerned.

If there is a decrease in demand, manufacturers will lose the main lever that allowed them to make money in recent years of crisis. They are caught in a vicious circle between price pressure and insufficient sales. A rare window of opportunity for Chinese automakers to flood the European market with their bargain-priced electric cars.