Ongoing chip shortage is costing car industry billions

Robotic arms manufacture automobiles at a plant of Chinese carmaker Geely in Changxing Economic and Technological Development Zone, Huzhou city, east China’s Zhejiang province, August 4, 2021. (Photo by Tan Yunfeng/People’s Daily Online)
(Photo by Tan Yunfeng/People’s Daily Online)

Car makers are likely to lose a total of 210 billion dollars in revenues this year, due to the global shortage of microchips and other essential electronic components needed to make cars, the consulting firm AlixPartners estimated on Thursday.

The chip slump has been weighing on the car industry for months, and it is unclear how long the issue will persist. Semiconductors are in very short supply worldwide – and the expansion of facilities to produce more, which has already cost chip manufacturers billions, is proving to be a lengthy process.

For the car industry it means vehicles that have been ordered often cannot be completed, though car makers can partly compensate for the production shortfalls with higher vehicle prices.

However, industries supplying the car makers are facing a far harder time, explained Marcus Kleinfeld of AlixPartners, as suppliers depend on car makers’ production volume for their revenue.

The lighting and electronics specialist Hella, for example, has already cut its business forecast in light of slowing global car production.

According to AlixPartners, the production shortfall for the car industry this year is likely to be 7.7 million vehicles, almost twice as large as previously assumed.

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