Car companies need to transform customer engagement to address chip shortages

I went to place an order for a minivan. With a couple of small kids, rear-window shades were a must-have.  They were only available as part of a “package”. Not available a la carte.  Bite the bullet and accept the $2650 package.  Dealer goes to place the order. Car company rejects it.  Probably because it does not have the display driver chips for the rear seat LCD screens – a part of the package that I did not want. Loses a $60,000 sale.

Chip shortages are likely to persist. Though there is some relief for high end parts such as graphics processors and CPUs, the shortage for power management ICs (PMICs), display drivers, MOSFETs, and certain low end MCUs is likely to continue into 2024.  The supply chain keeps taking one hit after another – a fire here or there; neon production; PFAS identified as carcinogenic; shortage in root stock for chemicals; Covid lockdowns in China and, of course, a high probability of climate change related impacts as we move to summer.

Car companies can move away from “packages” and go to a true a la carte “build your own car” where they let the consumer make the choice of the features against their availability.  This level of flexibility will require more investment in all their systems: customer and dealer facing; supply chain and manufacturing, demand allocation, model and trim level planning; revenue and profitability forecasting.

At the end of the journey, car companies can emerge with more flexibility in their marketing, agility in their supply chain and manufacturing and resilience to handle future unforeseen shocks to the system.