A shortage of computer chips has plagued the auto industry for the past year and a half, forcing plants to close, delaying auto shipments, and driving up car prices. But that isn’t the only issue confronting automakers.
Industry experts say automakers are having difficulty obtaining a variety of parts and raw materials for a variety of reasons, including supplier plant closures related to Covid, logistical issues involving shortages of ships, shipping containers, and truck drivers, and difficulty filling jobs by some suppliers.
As a result, the cost of the current supply chain crisis is much higher than previously estimated, resulting in much higher costs for automakers and car buyers as well.
Chips are “just one of a multitude of extraordinary disruptions the industry is facing — everything from resin and steel shortages to labor shortages,” according to Mark Wakefield, global co-leader of AlixPartners’ automotive and industrial practice. “There’s no room for error for automakers and suppliers right now.”
Auto plants all over the world are experiencing temporary shutdowns and slowed production rates, reducing the supply of available vehicles. According to AlixPartners, supply chain issues will cause automakers to produce 7.7 million fewer vehicles globally than they would if they had access to all of the parts and raw materials they require. That’s up from the 3.9 million vehicle shortfall that had been forecast in May.
The lack of vehicles on the market, combined with strong consumer demand, is a major factor driving new and used car prices to new highs.
Furthermore, according to AlixPartner’s latest estimates, the automakers will lose $210 billion in sales this year as a result of not building those vehicles. That’s nearly double the firm’s previous estimate of $110 billion in May.
Higher prices will offset some of the lost sales, bringing in an additional $90 billion in revenue on the vehicles that are sold. However, automakers will have to pay an additional $150 billion in higher parts and raw material costs, or about $2,000 per vehicle.
According to AlixPartners, the industry will lose a total of $270 billion as a result of the various shortages, while car buyers will pay $90 billion in higher prices.
Last year, the auto industry was hit by a computer chip shortage for the first time. As the pandemic spread and car sales plummeted, most automakers slashed future chip orders, assuming that demand for new vehicles would remain low for a long time.
When car sales rebounded faster than expected, automakers discovered they couldn’t fill their chip orders because the tech industry had snatched up the supply for use in everything from laptops and tablets to phones and 5G networks.