Chip Shortage to Cost Automakers $210 Billion in Sales: Analysis

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The global semiconductor shortage will lead to 7.7 million fewer vehicles produced in 2021, costing automakers billions in lost sales, according to consulting firm AlixPartners.

The forecast, released Sept. 23, estimates that the shortage will cost the auto industry $210 billion globally in lost revenue in 2021, up sharply from the May projections of $110 billion in forgone sales and 3.9 million fewer vehicles built.

“Everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things,” Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners, said in a statement.

Wakefield added that the semiconductor crunch is just one of the supply-side dislocations impacting automakers, with shortages extending to materials such as resin, steel, and labor.

“There really are no ‘shock absorbers’ left in the industry right now when it comes to production or obtaining material,” Dan Hearsch, a managing director in AlixPartners’ automotive and industrial practice, said in a statement. “Virtually any shortage or production interruption in any part of the world affects companies around the globe, and the impacts are now amplified due to all the other shortages.”

The updated forecast comes as Secretary of Commerce Gina Raimondo and White House economic adviser Brian Deese were hosting a semiconductor supply chain meeting in Washington on Sept. 23. Participants at the meeting—including producers, consumers, and industry groups—were to discuss the global chip shortage and the impact of the pandemic on semiconductor supply chains.

Automobiles have become increasingly dependent on semiconductors for everything from safety features such as airbag deployment and emergency braking assistance to computer management of engines for better fuel economy and performance.

The spread of COVID-19, the disease caused by the CCP (Chinese Communist Party) virus, has disrupted semiconductor manufacturing, with carmakers now facing stiff competition from the sprawling consumer electronics industry for the reduced supply of chips. The shortage has led to production cuts by automakers around the world.

By Tom Ozimek

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