Worsening Chip Woes to Cost Vehicle Makers $210 Billion

The cost of the intractable semiconductor shortage has ballooned by more than 90%, pushing the total hit to 2021 revenue for the world’s automakers to $210 billion, reports AlixPartners, which predicts global vehicle makers will build 7.7 million fewer vehicles due to the chip crisis this year – double the consultant’s previous estimate of 3.9 million.

As reported by Transport Topics, the industry forecaster says despite ongoing efforts to shore up the supply chain, semiconductor availability has worsened as manufacturers exhaust stockpiles and other industries have no more to spare.

“The barrel is empty, there’s nothing left to scrape,” Dan Hearsch, managing director of AlixPartners automotive and industrial practice, said in an interview with TT. “Going forward, sales will suffer. Sales

Key supply centers in Southeast Asia have been hit with factory shutdowns as COVID-19 outbreaks spread. It now takes a record 21 weeks to fill chip orders and auto executives say the shortage could last for years.

“It certainly feels like the most protracted supply shortage the industry has seen because it’s not over,” Hearsch said. “It’s certainly the most far-reaching. This is every place. This is everybody.”

As inventory on dealers’ lots has dwindled, prices have skyrocketed. Average car prices reached a record $43,355 in the U.S. in August, according to researcher Cox Automotive. Supply is so constrained, some dealers have resorted to renting cars so they have something to display in their showrooms, Hearsch said.

The chip shortage began late last year when vehicle makers underestimated demand as pandemic restrictions loosened.

This is the third estimate AlixPartners has issued this year on the financial impact of the shortage. It began by predicting in January it would cost the industry $61 billion and then lifted that to $110 billion in May.

Hearsch said he couldn’t guarantee there won’t be further upward adjustments to the forecast given myriad uncertainties facing the industry.

“Frankly, it’s just not getting better,” Hearsch said.

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