New forecast shows chip shortage to cost auto industry $ 210 billion

The current global semiconductor chip shortage will hit automakers harder than experts initially expected in May, as COVID-19 continues to disrupt chip production.

A new report released Thursday by consulting firm AlixPartners said the chip crisis will cost the global auto industry $ 210 billion in revenue this year. That’s almost double his May estimate of $ 110 billion.

In terms of production, AlixPartners predicts that automakers will lose the production of 7.7 million vehicles this year. In May, it had forecast a production loss of 3.9 million.

“Of course, everyone had hoped the chip crisis would have eased further now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and lingering problems elsewhere have exacerbated things,” said Mark Wakefield, global automotive co-leader. and industrial practice at AlixPartners in Southfield.

Chips are used in a variety of auto parts. The global shortage began earlier this year, in part due to the COVID-19 pandemic. As people increasingly worked from home and children were home schooled, demand increased for personal electronic devices in which chips are used.

Then, when automakers restarted factories after an eight-week shutdown last year at the height of the pandemic, automakers scrambled to make up for lost vehicle production. They also needed the chips for the cars. Soon, chipmakers could no longer keep pace with aggregate demand.

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Since the start of this year, General Motors, Ford Motor Co., and Stellantis have each had to halt production, run factories or build vehicles just short of chip parts, and then park them to wait for the parts to arrive before shipping. finish vehicles and ship them. at the exhibition halls. Meanwhile, dealership lots are virtually empty when it comes to new vehicle inventory and customers face long waits and higher prices to buy a new car.

General Motors trucks sit in a closed parking lot next to the Economy Lot across from Bishop International Airport in Flint on August 11, 2021.

GM Chairman Mark Reuss said on Tuesday that chip supply would likely stabilize at below normal levels. But Reuss, who spoke at the 2021 Mackinac Policy Conference on Mackinac Island, said demand continues to outstrip supply, especially as more and more automakers look to use them. chips for future electric vehicles. This pushes back the timeline for the “normalization” of chip supply, he said.

GM recently warned that the third trimester would be difficult for that. The automaker said it would build 200,000 fewer vehicles in the second half of the year, compared to the first half. GM previously estimated it would build 100,000 fewer cars in the second half of the year.

There are no more “shock absorbers in the industry right now when it comes to producing or procuring material,” said Dan Hearsch, general manager of the automotive and manufacturing practice of AlixPartners.

In a statement, Hearsch said almost any shortage or production disruption in any part of the world affects automakers. The impact is “magnified” due to other shortages.

Chips are just one of many extraordinary disruptions facing the industry – including everything from resin and steel shortages to labor shortages, ”Wakefield added. “There is no margin for error for automakers and suppliers at this time; they must calculate each alternative and make sure that they only undertake the best options. “

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Contact Jamie L. LaReau at 313-222-2149 or [email protected]. Follow her on Twitter @jlareauan. Read more on General Motors and subscribe to our automotive newsletter. Become a subscriber.

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