It’s been a tough year — and these numbers don’t soften the blow.
Supply chain issues continue to vex automakers around the globe, and manufacturers could ultimately lose $210 billion in revenue, according to consulting firm Alixpartners.
This latest forecast nearly doubles the estimate from earlier this year — including 7.7 million units in lost production, if shortage-related shutdowns continue at their current pace. While the semiconductor shortage continues to post headlines as dealer inventories dry up, that’s only part of the problem. Rising commodity prices, from aluminum and steel to plastic resin, are also forcing automakers to prioritize and adjust their production volumes, as Reuters points out.
Car and truck makers continue to sound the alarm as those prices are not significantly easing up as we head toward the end of 2021. In fact, IHS Markit slashed its own global auto production outlooks for 2021 and 2022, among other market analysts. Vehicle sales are slowing as production fails to ramp back up, leaving some dealers with around 20 days’ worth of inventory on hand. Contrast that to blockbuster years like 2018, when they had far more than double that amount of stock on their lots.
“We had originally assumed we would get back to normal and claw back volume,” Alixpartners managing director Dan Hearsch told Reuters. Instead, commenting on fourth quarter sales, Hearsch said “that’s not going to happen.” Automakers could be stuck with low inventories — and customers facing little choice and high prices — through 2022, and possibly even into 2023. Both the shortage of semiconductors and shipping backlogs at U.S. ports to import plastic resins and steels have manufacturers going to greater lengths to lock in supplies moving forward. In some cases, they are contracting to buy up to a 50 weeks’ worth of commodities in advance, something Hearsch says they never would have done a year ago.
We posted a video on the chip shortage sometime back, but the problem hasn’t really changed has it? Check that out below: