Global Motor Shortage 2021

Funny you mentioned the E-Tec. I got a 30 HP E-Tec for a work boat a few years back (great engine by the way) but I found out from the E-Tec licensed marine mechanic that there is absolutely no difference between a 25 and 30 HP E-Tec in hardware specs. (all parts are the same, etc.) The only difference is the computer that controls the output (and of course, the "25" vs "30" sticker you get on your engine. I.E. you pay much more for the extra HP because they change the computer's programming. I think it's the same as the 50 and 60 HP E-Tecs as well. Kinda felt like you are getting cheated for the extra cost when it's a computer programming thing. Anyway....

apparently there has been some hoarding by asian markets on electronic chips.....this created a shortage for the auto industry......I am betting this is part and parcel of the same thing.

https://asia.nikkei.com/Business/Business-S...-COVID-recovery

How do you ever get from that article to chip hoarding. Nobody is hoarding chips, the demand is too high right now and manufacturers are recovering so your 'hoard' would have higher value than it does today. The primary problem with the current shortages is most definitely not hoarding and is actually described in the article but perhaps not as clearly as it could have.

There is a relationship between supply, inventory, and demand that modern manufacturers try to keep very tight. Nobody wants excess inventory at any level of the manufacturing process and nobody wants shortages, this forces a relationship up and down the supply chain which runs on forecasts of demand.

Using just cars as a proxy for every covid related supply issue.

In the early days of covid plants dealerships were closed, consumers panicked and stopped buying, resulting in plants being shut down. Car manufacturers run on an overlap of processes called kanban, lean manufacturing processes, and JIT (just in time) processing. In a perfect scenario product (cars in this case) are available just as the consumer wants to buy it, ideally there is a one for one relationship but of course consumers are fickle about features, colors, upgrades, etc so the dealerships have to guess which variants of which models are going to be the most popular and they create a forecast. The auto manufacturers in turn create a forecast across all dealers so that their suppliers know what to build, which drives forecasts to their suppliers and so on up the supply chain to the suppliers of raw goods. In the reverse the suppliers at every stage try to outguess the downstream orders and build just ahead of demand. When everything is flowing well this all works out. However, in the early days of covid everything gets shut down suddenly which is the equivalent of shutting off an assembly line that impacts literally hundreds of companies big and small. If this goes on for long enough (just weeks to a month) then the upstream manufacturers have to shut down lines and stop producing product or they risk inventory issues. This means laying off workers, etc. When demand goes back up as the dealership reopens the dealer raises his own forecast (which takes time to build confidence for), the auto manufacturer does the same, and the supply chain gets re-started but... starting these processes back up doesn't happen nearly as quickly as shutting them down. The supply chain never wants to over manufacture their goods, whatever they are so they keep things at just the level of the current forecast. This in turn limits total production, which in turn creates back pressure on the delivery of cars. The dealership in turn reduces their forecast because they cannot get enough cars. (the topic of this thread is the dealer warning the consumer that motors are not available). The whole process starts over again but at a smaller level. This is the whipsaw effect in manufacturing, like throwing a rock in a lake the initial impact creates a large wave but over time the effect diminishes and we get back to smooth sailing.

The knock on effect of all of this is that demand may not have gone down and in fact it is up in some sectors as consumers want to get outside driving sales of outdoor sports products. This in turn drives value in the used market which in turn drives down demand for new products as consumer confidence in their ability to buy new goes down. And so on. It will take over a year for the market to recover, for those waves to die down enough to get back to a normal manufacturing level (and normal prices).