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Automakers will lose $110bn to chip shortage in 2021 ─Experts

*Experts say the automotive industry is likely to produce about 3.9 million fewer vehicles than originally planned this year

Isola Moses | ConsumerConnect

The semiconductor chip shortage is expected to cost the automotive industry $110 billion in revenue this year, according to a new analysis by consulting firm AlixPartners. The firm’s latest forecast is a significant increase from its January estimate of $60 billion in expected losses.

ConsumerConnect reports these chips are used in a number of key vehicle components, including infotainment systems, brakes, and power steering.

The publication had reported that as the global chip shortages continue to deepen, certain vehicle manufacturers reportedly had attempted idling factories until the troubles blew over.

A car assembly plant 

Yet, as the crisis keeps stretching into its fifth month and getting worse now, carmakers are being compelled to get creative in order to keep at least some production moving forward in their factories.

Nissan, for instance, is leaving navigation systems out of thousands of vehicles that typically would have them because of the shortages.

Ram no longer offers its 1,500 pickups with a standard “intelligent” rearview mirror that monitors for blind spots.

Renault has stopped offering an oversized digital screen behind the steering wheel on its Arkana SUV in order to also save on chips.

It was gathered that the crisis is an historic test for the century-old auto industry just as it is trying to accelerate a shift toward smarter, electric vehicles.

BMW AG, Honda Motor Co. and Ford Motor Co. recently, all flagged worsening problems from chip shortages, according to report.

A failure to secure critical supplies is a massive short-term setback, millions of vehicle sales will be lost this year, and bodes ill for the future as competition from tech-savvy Internet and consumer-electronics companies intensifies.

Now, Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners, in a statement said several factors have led to the increase.

He stated: “The pandemic-induced chip crisis has been exacerbated by events that are normally just bumps in the road for the auto industry, such as a fire in a key chip-making fabrication plant, severe weather in Texas and a drought in Taiwan.

“But all these things are now major issues for the industry — which, in turn, has driven home the need to build supply-chain resiliency for the long term.”

In terms of disruptions and delays, AlixPartners stated these roadblocks are likely to impact the industry for a majority of 2021.

The industry will likely produce about 3.9 million fewer vehicles than originally planned for 2021, and the ongoing chip shortage could also delay the rollout of some 2022 models, the firm said.

Both Ford and General Motors also have announced that they will produce fewer cars and trucks because of the semiconductor chip shortage this year.

Dan Hearsch, Managing Director at AlixPartners, told the CNBC, that there are up to 1,400 chips in most vehicles today.

Hearsch stated: “This is really is a critical issue for the industry.

“There are simply going to be instances where they won’t be able to get all the parts.”

AlixPartners Chief is hopeful that the third quarter of 2021 will see enough chips to “get everybody back up and running for the most part.”

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