The automotive industry is grappling with an unprecedented set of challenges that are causing headaches for car manufacturers and buyers alike.
Experts weigh in on various reasons behind these issues, such as the impact of the Coronavirus pandemic, raw material shortages, and logistical hurdles.
Closures of factories by suppliers due to the pandemic, logistical challenges thanks to insufficient ocean-going vessels, containers, and truck drivers, and some delivery issues affecting job vacancies - these are a few of the factors adding fuel to the fire.
The escalating costs associated with the current supply chain crisis are much higher than anticipated, leading to substantial price increases for both automakers and car buyers.
Mark Wakefield, the global co-leader of the automotive and industrial practice at AlixPartners, noted, "Chips are just one of many unusual disruptions that the industry is facing, from forest and steel shortages to labor shortages." He added, "Auto manufacturers and suppliers now have no room for mistakes."
Short-term production halts and slowed production rates are affecting auto factories worldwide, reducing the available supply of vehicles. AlixPartners predicts that these supply chain issues will cause a decrease in global vehicle production by 7.7 million vehicles, compared to the number they could produce if all required parts and raw materials were readily available. That's an increase from the May prediction of a 3.9 million-vehicle deficit.
High vehicle demand paired with a limited supply are primarily responsible for soaring new and used car prices reaching record highs.
Additionally, the automakers will bear approximate $210 billion in losses due to production halts this year, as per the latest estimations by AlixPartners. This is almost twice the $110 billion they had forecasted in May.
Although a portion of these losses will be offset by higher prices, automakers will still need to shell out an additional $150 billion on higher part and raw material costs, amounting to roughly $2,000 per vehicle in extra expenses.
Enrichment Data Integration: While several disruptions compound the situation, the transition to electric vehicles (EVs) is posing its share of challenges. In addition to technological investments, the need for efficient charging infrastructure is impacting consumer demand and production, further exacerbating the current crisis.
Reaktion der Lieferkette In the past year, the microchip shortage initially impacted the auto industry. As Covid-19 outbreaks dwindled, and automobile sales recovered faster than anticipated, auto manufacturers realized they could not rebuild their chip orders as the technology sector had swooped in to grab existing stocks for laptops, tablets, smartphones, and 5G networks.
Owing to increased chip demand, anticipate a low supply for the second quarter of this year. However, a new wave of Covid-19 outbreaks has triggered fresh supply chain issues and forced chip factories in heavily affected countries like Malaysia to temporarily halt operations.
Moreover, shortages have been reported in various other critical materials.
"It's not just a chip shortage," said Cindy Jaudon, the regional president for America at global enterprise software company IFS. "Almost every industry… is facing supply chain problems," she noted. "Our ports are highly congested." Paint makers are grappling with the scarcity of titanium dioxide, a critical raw material.
As of now, it appears that the industry has no immediate relief in sight.
"The industry has no shock absorber when it comes to production or procuring materials," said Dan Hearsch, AlixPartners' CEO. "Fact is, every shortage or production halt affects companies worldwide for various reasons." He added, "These shortages continue to intensify."
