Skip to Content

Is car chip shortage over?

The global semiconductor chip shortage has significantly disrupted the automotive industry since 2020. With chip supplies still tight, there are questions around whether the shortage is finally easing up. In this article, we’ll examine the latest data and expert opinions to evaluate where the car chip shortage stands currently and when it may end.

What caused the automotive chip shortage?

The chip shortage stems from a perfect storm of factors that converged in 2020 and 2021:

  • Surging demand for consumer electronics like smartphones, computers, and gaming consoles during the COVID-19 pandemic, driven by remote work and stay-at-home orders.
  • Automakers had canceled chip orders early in the pandemic when car sales slumped. chip suppliers allocated freed up capacity to other sectors.
  • A fire at a Japanese chip plant of Renesas, a major supplier to automakers.
  • Drought and blackouts in Taiwan curtailed production.
  • U.S.-China trade tensions limited access to advanced chips.

Carmakers cut chip orders early in the pandemic, expecting a prolonged slump in sales. But demand rebounded much faster than expected, leaving carmakers short of chips. With capacity shifted to consumer electronics, shortages quickly developed and automakers were forced to idle factories and cut production.

What is the current state of chip supplies for automakers?

Let’s look at some key leading indicators on chip supplies:

  • Automotive chip lead times – the time from ordering to delivery – has declined from over 20 weeks in early 2022 to around 14-18 weeks currently, indicating supplies are getting slightly better.
  • Chip inventories held by automakers and suppliers have risen, giving more buffer against shortages.
  • Investments to add capacity by major chip makers like TSMC, Samsung and Intel will boost supply in 2023-24.
  • Industry association SIA forecasts over 20% growth in automotive chip supplies in 2023.

While lead times remain lengthy, the trends indicate gradual improvement in chip availability. Investments made in 2021-22 to expand capacity are slated to come online in 2023-24.

When will the automotive chip shortage end?

Experts estimate the acute phase of shortages will persist through much of 2023, with a return to normalcy by 2024 or 2025.

  • Market research firm Gartner sees shortages continuing through the end of 2023, with a likely oversupply in 2024 as new capacity comes online.
  • Consulting firm AlixPartners forecasts chip supplies to remain very tight until Q3 2023, with conditions progressively improving through 2024.
  • S&P Global Mobility expects the shortage to last until the end of 2023, stretching into 2024 for some chips.

The consensus points to 2023 remaining a challenging year, with shortages gradually abating and production disruptions becoming less severe. By 2024, capacity additions should start outpacing demand growth, easing the supply crunch.

Which automakers have been most impacted?

Some carmakers have coped better than others depending on their chip inventory strategies, supplier relationships and product mix. According to S&P Global Mobility, brands with the biggest production losses due to chip shortages in 2021-22 were:

Automaker Estimated Volume Loss (million units)
General Motors 1.8
Ford 1.7
Renault-Nissan 1.5
Stellantis (Fiat Chrysler) 1.4
Volkswagen Group 1.2

These automakers were hit hardest due to their high volume, mass-market portfolios concentrated in sedans and light trucks that rely more heavily on chips. Luxury brands like Mercedes, BMW and Audi weathered shortages better with their focus on higher-margin vehicles.

What are automakers doing to handle shortages?

Facing tight supplies, car companies have deployed a range of tactics to keep production moving:

  • Cutting features to reduce chip usage – removing touchscreens or driver assistance features for instance.
  • Reworking vehicle designs and electronics architecture to adapt to available chips.
  • Renegotiating with chip suppliers and paying higher prices to get priority.
  • Stockpiling extra chip inventory as buffer against shortages.
  • Securing future supply through direct investments in chip partners.

Despite these mitigation efforts, most automakers are still seeing constrained output and inability to fully meet rebounding post-pandemic demand. Until capacity rises, shortages will continue hampering production volumes.

What risks remain even as shortage eases?

As the supply-demand imbalance improves, risks and uncertainties remain that could prolong shortages:

  • Chip demand from EVs and advanced driver assistance systems is surging, potentially offsetting capacity growth.
  • A recession could drive another pullback in orders and disrupt the recovery.
  • China’s zero-COVID policy and tensions with Taiwan pose supply chain risks if lockdowns recur.
  • Further geopolitical disruptions, trade disputes, or natural disasters could limit supply.

While shortages should progressively abate assuming no new shocks, it will take time to rebuild healthy inventories and supply buffers across the automotive chip supply chain. Until then, minor disruptions could cause setbacks.


In summary, although chip supplies remain constrained entering 2023, data suggests the worst of the automotive semiconductor shortage may be over the next 12-18 months. Lead times are slowly improving, new capacity is coming online, and demand growth is forecast to rebalance with supply by 2024. However, risks remain that could prolong scarcity. With chips essential to vehicle production, further supply chain resilience will be key to ensure automakers can meet demand recovery through this period of semiconductor market tightness.