AlixPartners MD: Global chip shortage to cost the auto industry billions in lost production

The global semiconductor chip shortage has dealt a severe blow to the automotive industry, with major players like BMW, Volkswagen, Ford, and General Motors all feeling the pinch. Dan Hearsch, the Managing Director in the Automotive Practice at AlixPartners, sheds light on the far-reaching repercussions of this ongoing crisis. The shortage is expected to result in the loss of production of approximately 7.7 million vehicles by the end of the year, translating to a staggering $210 billion in lost sales for auto manufacturers. While OEMs and auto dealers are benefiting from increased pricing, auto suppliers are facing significant challenges due to the supply chain disruption. The ripple effects of this shortage are being felt globally, with the automotive industry grappling with longer lead times and heightened uncertainty. Despite the efforts to mitigate the crisis, such as near-shoring and increased investment in semiconductor capacity in the United States, the impact is expected to be long-lasting. The industry is in dire need of better planning, enhanced communication with suppliers, and improved flexibility in engineering design to navigate the current challenges. As the demand for semiconductors continues to outstrip supply across various industries, including automotive, steel, and technology, a cooling down of economic activity may offer some respite. However, achieving a balance between supply and demand will require time and concerted efforts from stakeholders. While the chip shortage has disrupted production schedules and supply chains, the automotive industry is expected to rebound in the long run. The development and adoption of electric vehicles may face some near-term setbacks, particularly for new entrants in the market. However, the long-term outlook for EV adoption remains positive, with delays in planning and development likely rather than significant impacts on overall adoption rates. When it comes to the issue of hoarding chips, Hearsch suggests that while it is a possibility, the primary challenge lies in the tight capacity and lack of efficient communication and planning processes within the semiconductor industry. The disruptions caused by factors like manual processes and system inefficiencies have compounded the shortage, making it difficult for manufacturers to keep up with the unprecedented demand. Despite efforts to address the shortage, including government interventions and supply chain adjustments, the industry continues to grapple with the aftermath of the chip crisis. As the global economy navigates through the challenges posed by the chip shortage, stakeholders in the automotive industry are working towards building more resilient supply chains and adapting to the evolving landscape of semiconductor manufacturing. With a concerted effort towards innovation, communication, and strategic planning, the industry aims to overcome the current crisis and emerge stronger in the future.