The cost of the intractable semiconductor shortage has ballooned by more than 90 percent, pushing the total hit to this year’s revenue for the world’s automakers to US$210 billion.
That is the latest dire forecast from AlixPartners, which predicted global automakers would build 7.7 million fewer vehicles this year due to the chip crisis. That is almost double the consultant’s previous estimate of 3.9 million.
Despite ongoing efforts to shore up the supply chain, semiconductor availability has worsened, as automakers exhaust stockpiles and other industries have no more to spare.
Photo: Bloomberg
“The barrel is empty, there’s nothing left to scrape,” Dan Hearsch, managing director of AlixPartners automotive and industrial practice, said in an interview. “Going forward, sales will suffer. Sales hadn’t suffered, because there was enough inventory to draw from. It’s not there anymore.”
Automakers have begun warning the problems are metastasizing and could crimp third-quarter earnings, with Faurecia SE yesterday joining Volkswagen AG’s truck unit Traton SE as the latest to sound the alarm. The French parts maker said it would no longer meet previously projected sales and profitability goals for this year.
Last week, key auto forecaster IHS Markit made the biggest adjustment to its projection yet on auto output since starting to reduce estimates that have been falling all year due to the global chip shortage.
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, the average vehicle price has skyrocketed, reaching a record US$43,355 in the US last month, researcher Cox Automotive said.
Supply is so constrained, some dealers have resorted to renting cars so they have something to display in their showrooms, Hearsch said.
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 US$61 billion and then lifted that to US$110 billion in May.
Hearsch said he could not guarantee there would not be further upward adjustments to the forecast given myriad uncertainties facing the industry.
“Frankly, it’s just not getting better,” Hearsch said. “People are adjusting to the fact that this is going to take much longer than we all thought.”
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