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What’s on Tap for the Auto Supply Chain in 2022?

Feb. 2, 2022
A new SEMA report outlines the key forces that are impacting the auto supply chain right now and gives its predictions for the future.

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As a trade association consisting of manufacturers, distributors, retailers and other organizations involved with the specialty auto parts and accessories sector, the Specialty Equipment Market Association (SEMA) pays close attention to supply chain trends that impact the automotive manufacturing sectors.

From semiconductor chip shortages to logistics snarls to rising freight costs, most of the challenges facing SEMA members right now are also impacting the broader market. Add port congestion, the Omicron variant and the persistent labor shortage to that list, and you wind up with a “perfect storm” of supply chain issues that emerged in 2020, escalated in 2021 and then carried right into 2022.

The good news is that from SEMA’s vantage point, supply chain disruption will continue to be an issue this year, but the worst is likely behind us. “SEMA Market Research projects that most issues should improve to more normal levels by the end of 2022,” the organization points out in its latest Market Research: SEMA Future Trends report. “Prices are likely to remain somewhat elevated for longer however—likely into 2023.”

Top Trends to Watch

Specific to the supply chain disruptions that are impacting businesses and consumer alike, SEMA says the key points to watch this year include: 

  • Over 80% of companies in the specialty equipment industry have been severely or moderately impacted by supply chain disruption. “Unsurprisingly, vehicle manufacturers have been hit the hardest by the disruption, with 92% reporting a severe or moderate impact on their business because of it,” SEMA reports. “Part and product manufacturers (86%) are also feeling this as well. Distributors are likely feeling double the impact of it in terms of both sourcing product and getting it to retailers.
  • Demand for semiconductors/chips is outpacing supply. Increased production capacities will likely meet demand by the second or third quarter of the year. SEMA doesn’t expect the auto industry to recover from the shortage until 2023. “In 2020 and 2021, robust consumer demand for technology products pushed almost all major product categories that purchase semiconductors to double-digit growth rates,” SEME points out, noting that global semiconductor sales had grown for five quarters in a row through the third quarter of 2021. “This surge in demand has led to supply shortages and strained production capabilities.”
  • Shipping and transportation delays, high rates and labor shortages are translating into longer lead times and higher product costs. Getting product from the ports to factories or to retailers is an important part of the supply chain, but the current truck driver shortage is creating major delays at this juncture in the supply chain. “This shortage is affecting many industries, including those that ship meat to stores or gas to pumps. This is not a new problem—there has been a shortage for years,” SEMA points out in its report, noting that the supply chain disruptions and surges in demand over the last two years have exacerbated the problem. “Logistic problems should be solved by the end of 2022,” the group predicts, “but elevated prices [are] likely to remain into 2023.”
  • Commodity prices—and demand for them—will remain high. Noting that input and commodity prices are extremely high now, SEMA says that some prices will decrease this year but as a whole they remain elevated for some time. “This will put upward pricing pressure on auto parts and accessories,” the group states. “Retailers and consumers will likely continue to feel an increase in the cost of auto parts for the time being, if they haven’t already. This will be something to monitor in 2022. For now, demand remains very high.”

Despite the ongoing uncertainty, SEMA expects continued economic growth this year, but says that U.S. economic growth may be slower in 2022 (versus 2021) due to some prevailing headwinds. “By 2023, however, the economy should be back to pre-pandemic growth levels,” the group predicts, noting that the key impacts to watch include consumer spending levels and confidence; inflation; supply chain disruption; and labor shortages.

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.