Chip shortages cause automaker slow-downs, guidance changes

18:45, 20 January 2022

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  • F
    Ford Motor
    13.65 USD
    0.36 +2.750%
  • GM
    General Motors Co
    38.64 USD
    1.15 +3.090%

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Auto chip
Microchip shortages are playing havoc with automobile production - Photo: Shutterstock

As chip shortages in the auto industry cause production delays and plant shutdowns, Wall Street investors with an eye on car stocks should prepare for price increases and a demand environment.

Both Ford and Toyota have been pulling back on production this week due to global supply chain blockages and a lack of semiconductors, while Ford also closed its assembly plant in Flat Rock, Michigan on Tuesday and is not expected to reopen it until next week.

Despite a series of emails, Ford did not respond for early comment, while a Toyota spokesperson told Capital.com the car manufacturer would continue facing shortages and subsequent production issues at their North American plants.

“Though the situation remains fluid, we are projecting a reduction of approximately 25,000 to 30,000 vehicles in February, but we do not anticipate any impact to employment at this time,” according to Toyota.

Market response

While the auto sector faces increasing instability, industry shares wobbled between gains and losses on Thursday, with Ford stock falling roughly 0.65% and Toyota rising 0.57%.

In other auto shares, BMW has fallen around 1.41% and General Motors is down approximately 0.14%.

In an interview with Capital.com, David Russell, vice president of Market Intelligence at TradeStation said, “Auto stocks were up this morning because the overall market bounced higher after dropping for several days.”

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For investors, “the chip shortages mean uncertainty, and they should expect a strong pricing and demand environment,” he said. “The fundamentals are very strong for autos, but there will be plenty of bumps along the way.”

“We are in a volatile market with the (US Federal Reserve) right now, and investors should be careful about complacency.”

Read more: US mid-day: Stocks rebound on down week

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