Semiconductor crisis could cost the car industry $210bn in lost revenue this year

Experts have updated their outlook as manufacturers deal with chip shortages.

Volkswagen ID.3 factory
Volkswagen ID.3 factory

The semiconductor chip shortage continues to affect the car industry, with many manufacturers unable to fulfill orders.

It has resulted in new car buyers facing long waits and cancelled orders, as manufacturers scrabble for the limited stock of computer chips worldwide.

Consultancy firm AlixPartners says the chip shortage could cost the car industry $210 billion (£154bn) in lost revenue this year – a drastic increase on projections in May that estimated losses of $110bn (£80bn).

It is estimated that 7.7 million fewer vehicles will be sold this year, hitting manufacturer pockets hard.

City AM reports Nick Parker, a partner at AlixPartners, saying: “Unfortunately, the chip crisis shows little sign of abating this year, despite what many across the automotive industry had hoped.

“The perfect storm that we’re seeing of supply chain disruptions, restricted labour markets, and rising shipping costs are only exacerbating the issue further, and new vehicle production is now facing delays that are likely to last well into 2022.”

The chip shortage has come, in part, from the coronavirus pandemic. Car factories shut down and customers stopped buying vehicles, with chip makers shifting production towards consumer electronics that saw sales boom during global lockdowns.

Switching supply back to cars has proved problematic, compounded by a boom in demand across all sectors that was already stretching the industry pre-pandemic. Now pretty much every industry with products requiring the chips is struggling to keep up with consumer demand.

On top of all this, a new wave of coronavirus infections in Southeast Asia has further hit production.

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