COVID-era wait times for new cars could be back: Resource bottleneck for key car components have some car manufacturers in 'panic' - but the pain won't be spread evenly

As the trade war between the US and China intensifies, new reports from auto industry suppliers cast a dark cloud over important component supply for new cars.

Beijing has placed some key minerals on an ‘export control list’ as part of a response to the Trump administration’s increased tariffs on goods imported from China. This has disrupted global supply chains and could potentially lead to the same six-month-plus wait times for new vehicles, which was experienced during COVID-related factory shut-downs and supply disruptions.

Seven of the minerals on the list for export restrictions are rare earths — a group of materials used for the production of alloys and magnets — which are key components in many automotive parts from mirrors to fluid pumps, but particularly permanent magnets used in EV and hybrid motors and alternators for combustion cars.

China is responsible for up to 90 per cent of production of these key components, and Reuters cited executives from suppliers who said the “industry was in full panic” over restrictions on supply.

The publication also cited analysts who said the knock-on effects of the restrictions could force automakers to make cars without certain parts and park them until they become available - in echoes of similar practices that took place during the COVID-era supply disruptions. 

During the COVID-era and subsequent microprocessor shortage, some cars were delivered without various difficult-to-acquire features like blind spot monitoring, either through the introduction of limited variants or tweaks to standard specifications.

How bad could it get? During the peak of the COVID-19 era shortages, models in high demand such as the Toyota RAV4 were attracting wait times of more than 24 months.

Fresh supply shortages could start as soon as July as the world’s automakers analyse the impact on their supply chains.

It seems automakers from Europe, America, and Japan will be most exposed to these issues, handing Chinese automakers yet another advantage over their rivals.

Reuters also reported Hyundai Group and its suppliers have stockpiled between six to twelve months of rare earths.

Another round of supply shortages or price increases to traditionally popular brands could continue to transform the landscape of new cars in Australia. During the microprocessor shortage, less exposed brands such as MG and GWM started to leap up the sales charts at the expense of others, a trend that hasn’t been reversed since.

The same Reuters report said some companies seeking to shake China’s hold on the supply of magnets and key materials, either through recycling existing materials or building new parts which are rare-earth-free, have seen a boost in interest since restrictions began in April, but it could take years for these suppliers to have the scale be able to meet demand or be cost competitive with Chinese exporters.

As usual, Australia will be particularly exposed to any supply-related changes, as our relatively low-volume market tends to be far down on the priority list for the largest groups out of Japan and Europe.

During the previous new-car shortages, even prices of used cars skyrocketed as buyers couldn't wait to source individual transport away from a risk of being exposed to COVID in a double-whammy effect. The effect on used car prices in some segments has never recovered to pre-covid levels.