General Motors to halt production at most North American plants

GM and other car manufacturers had hoped that the chip shortage would soon be a thing of the past. However, the surge in COVID-19 cases, particularly in Southeast Asia where many chip producers are based, has only exacerbated the problem for the automotive industry.

Only a handful of GM factories will remain operational during the holiday season. These facilities produce full-sized SUVs and Pickups, as well as some sports cars like the Camaro and Corvette. GM prioritizes using the available chips in its most popular and profitable vehicles.

However, even some of GM's large-scale production plants for Pickups and SUVs will continue to be affected by the shutdown.

The limited chip supplies have resulted in car manufacturers having only limited new vehicle inventories. This has led to record-high new car prices. Nearly all major automakers have implemented limited production plans to combat this issue.

Insights

The chip shortage is causing significant challenges for car manufacturers, leading to production halts, inventory build-ups, and record-high prices. Here are the key points:

1. Production Halts: Major car manufacturers like GM and Ford have temporarily shut down production at several factories due to the worsening chip shortage. This includes GM's eight North American plants, which produce popular vehicles like the Chevrolet Silverado pickup, and Ford's Kansas City Assembly Plant[2].
2. Supply Chain Disruptions: The global semiconductor shortage has exposed the critical role of chips in automotive manufacturing. Supply chain disruptions have forced automakers to delay production and adjust their sourcing strategies. Although the industry is recovering, the shortage highlights the importance of building more resilient, localized supply chains for future stability[1].
3. Inventory Build-Up: The chip shortage has resulted in a mismatch between production and market demand. Automakers accumulated significant inventory in anticipation of sustained demand post-COVID, but sales have tapered off. This has led to excess stock across the supply chain[5].
4. Impact on Prices: The lack of new models due to the chip shortage is driving up prices. The high demand for pre-owned vehicles has forced dealerships to focus on improving used car reconditioning efficiencies[4]. Additionally, the high demand and limited supply have contributed to record-high consumer spending on new vehicles, with projected spending reaching $38.5 billion in January 2025[3].
5. Technological Trends: The demand for high-performance chips is growing due to the rise of electric vehicles (EVs) and autonomous cars. EVs require complex electronics for battery management, charging systems, and motor control. Autonomous vehicles need chips that can process immense amounts of data for split-second driving decisions[1].

In essence, the chip shortage is causing substantial disruptions in the car industry, leading to production halts, inventory build-ups, and a surge in prices. This situation is expected to continue affecting the automotive industry in the near future.