KUALA LUMPUR (Sept 14): Fitch Solutions Country Risk and Industry Research said while it remains upbeat on Asia's vehicle sales over 2021, the surge in the Covid-19 Delta variant risks derailing vehicle sales recovery in many countries in the region.

In a report yesterday, Fitch Solutions said the global semiconductor shortage will continue to hamper vehicle production across the world, which will see the supply of new vehicles remaining very tight.

“This will see vehicle sales in many markets in Asia drop steeply amid the lack of new vehicles,” it said.

Fitch Solutions said this is due to the overall still very low vaccination rates, which could see strict movement restrictions reintroduced. This will see consumers unable to buy vehicles (some might use online portals to buy vehicles) and risks aggravating the global supply chain risks, especially when it comes to semiconductors.

“Additionally, we note that strong demand for electric vehicles (EVs) in markets such as China, South Korea, Australia and New Zealand will aid the continued recovery of the region's vehicle sales.

“We forecast that Asia's vehicle sales will rebound by 14.1% in 2021 to reach an annual sales volume of just over 44.56 million units, up from a 2019 vehicle sales volume of 41.5 million units.

“We also forecast that vehicle sales in Asia will continue to expand by an additional 4.9% over 2022,” it said.

Fitch Solutions explained that it expects the global semiconductor shortage will continue to hamper vehicle production across the world, which will continue to limit the supply of new vehicles.

It said this will see vehicle sales in many markets in Asia drop steeply amid the lack of new vehicles.

“The global semiconductor (chip) shortage is likely to worsen over the next few months (particularly in September and October of 2021) before it starts improving into 2022.

“We believe that the spread of Covid-19 and related public health measures and restrictions will remain major disruptors to chip production in Asia, thereby compounding the risks in the complex chip supply chains.

“We also believe that it will likely take at least another quarter for chip producers affected by the new variant of Covid-19 to work through the backlog of orders,” it said.

In addition, the research house said that that the average prices of all types of semiconductors will continue to increase over 2021 and 2022 as excess demand creates an auction-like trading environment, which will see some large chip buyers such as Apple and Samsung increasingly pay more for semiconductors.

“Indeed, Taiwan Semiconductor Manufacturing Company (TSMC), a major global chip supplier, plans to increase the price of its chips by 10%-20% in 2021, and we expect this upward price pressure to carry into 2022 and filter into the cost of end-products,” it said.

However, Fitch Solutions said it still only expects the shortages to noticeably ease from mid-2022 onwards as new chip production capacity starts to come online; however, there will still be some supply chain risks and concomitant shortages until mid-2023.

“We believe that the onstream of additional chip production capacity will face delays, and overall demand will continue to outpace supply in the near term, due to the extended time it takes for chip producers to add additional capacity to their production lines and the high set-up costs of new plants.

“Over the first eight months of 2021 (8M21) the global chip industry has seen some substantial investment commitments and changes in the supply of chips,” it said.