Auto sector could lose $210 billion this year due to chip shortages

The global automotive sector will lose almost twice as much revenue this year from semiconductor shortage-induced production lapses than first predicted, according to analysts.

Global consulting firm AlixPartners increased the amount it expects the worldwide automotive industry to lose due to the chip shortage in its latest report released this week. It now predicts $210 billion in losses during 2021 - up from $110 billion in its May forecast.

It also expects the industry will under produce by 7.7 million vehicles this year — up from 3.9 million in its May forecast.

Mark Wakefield, global co-leader of the company's automotive and industrial practice, blamed the increased forecast on various problems, including pandemic lockdowns in Malaysia.

"Chips are just one of a multitude of extraordinary disruptions the industry is facing, including everything from resin and steel shortages to labor shortages," he warned. "There’s no room for error for automakers and suppliers right now; they need to calculate every alternative and make sure they’re undertaking only the best options."

Other executives at the firm warned that a multitude of shortages in components and materials is amplifying the impact on the automotive sector.

Auto manufacturers have been suffering component shortages for months, which forced Ford and General Motors to shut down plants in the US and elsewhere. The White House has pledged to address the shortage and has sought funding to support the Creating Helpful Incentives for the Production of Semiconductors (CHIPS) act proposed last June and subsequently passed as part of the National Defense Authorization Act.

In July, automotive business leaders and leaders from the semiconductor and telecommunications sectors wrote to Congress asking it to fund the legislation. They called the funding, which would introduce tax credits for domestic fabrication plants, a national priority.

The same month, chip giant TMSC said the global chip shortage would extend into 2022, but it mentioned the supply crunch may ease in the automotive sector during the fourth quarter.