- A global shortage of semiconductor chips could cause car companies to lose as much as $61 billion in revenue, Bloomberg reports.
- Production of several car models has already been delayed at some Toyota, Nissan, Volkswagen, Ford, and Fiat Chrysler plants.
- The supply chain disruption comes when the industry was just beginning to recover from COVID-19 lockdowns.
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A global shortage of semiconductor chips driven by disruptions in the supply chain due to COVID-19 could cause car companies to lose as much as $61 billion in revenue this year, Bloomberg reports,citing estimates from the consulting firm Alix Partners.
Several car companies are already starting to feel the pinch. Production of multiple car models has already been delayed at several Toyota, Nissan, Volkswagen, Ford, and Fiat Chrysler plants due to the shortage, Reuters reports.
The lack of chips has forced automakers to prioritize the production of their higher prices, and often more profitable , models.
In Texas, Toyota limited its production of its full-size Tundra. In Japan, Nissan was forced to lower its production, while Volkswagen was already lowering production rates in December, accordingto ABC News. Ford is also slowing down its production on the Escape and Lincoln Corsair in Louisville and Fiat Chrysler has already suspended production at plants in Ontario and Mexico, ABC reported.
Car companies stand to lose billions of dollars due to the disruption in supply. Alix Partners told Bloomberg car companies could lose over $14 billion in the first quarter and about $61 billion overall in 2021.
Semiconductor chips have become an essential part of the manufacturing process for vehicles, especially as cars continue to become increasingly sophisticated, leaning towards automation and electrification. The chips are used in navigation, bluetooth, and collision detection systems, to name a few, and account for about 40% of a new car’s cost, according to a report from Deloitte.
A Toyota spokesperson told Insider they are working to address the impact of the shortage.
“We are evaluating the supply constraint and developing countermeasures to minimize the impact to production,” a Toyota spokesperson told Insider. “We do not expect any impact to employment at this time.”
The other auto companies had not responded to a request for comment at the time of the publication.
The car industry isn’t the only sector reliant on semiconductor chip supplies. These chips, which store data and programs, are also prevalent in all electronics and necessary for phones, gaming systems, and computers.
Demand from the tech industry as the work-from-home boom has necessitated the purchase of more personal electronics and has only accelerated the shortage, as chipmakers focused their product sales on tech companies when automakers were mostly out of the game in the spring.
Apple already saw the impact of chip shortages in the production of its iPhone 12 in November, according to Bloomberg.
The blow to the supply chain and future revenue of automakers comes during a time when the industry was just beginning to recover from shutdowns and declining sales at the onset of the pandemic.
Mass shutdowns at plants, reluctant shoppers who were less inclined to purchase a new car amidst the uncertainty of the pandemic — especially without a commute to use it on — caused companies like Ford and Nissan to furlough tens of thousands of employees in the spring.
But demand returned over the summer as low interest rates and stimulus checks made the industry more appealing. Production at the manufacturing sites also went back up as state lockdowns eased and automakers worked to meet demand.
The chip shortage and impact of the pandemic on supply chains around the world has highlighted the need for a more localized supply chain. Both the Biden and Trump Administrations have focused on rebuilding US supply chains to avoid future shortages on necessary items for companies like semiconductor chips.