The global microchip shortage has dealt a major blow to the auto industry hard, with automakers forced to cut production and losing billions in revenue. Now, it looks as though the shortage will end up costing the industry nearly twice as much as originally expected.
According to a recent report from Detroit Free Press, which cites an analysis by consulting firm AlixPartners, the global microchip shortage will end up costing the global auto industry upwards of $210 billion in lost revenue, nearly double what was forecast in May ($110 billion).
According to the report, the microchip shortage will force automakers to cut production by as 7.7 million units this year, once again nearly double the 3.9 million units forecast to be lost back in May.
“Of course, everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things,” said global co-leader of the automotive and industrial practice at AlixPartners, Mark Wakefield.
Recently, General Motors president Mark Reuss said that he expects the global microchip shortage to begin to stabilize, albeit not at the volume needed by the auto industry in order to continue production at the level desired. Earlier in September, General Motors CFO Paul Jacobson indicated that the global microchip supply is expected to begin evening out next year.
The latest estimates put lost production for General Motors this year at 800,000 units, with nearly every one of GM’s production facilities impacted by the microchip shortage. One of the hardest hit is the GM Fairfax Assembly plant in Kansas, which has been idle since February, and is responsible for production of the Cadillac XT4 and Chevy Malibu.
General Motors has opted to employ a number of strategies in an effort to curb the impact of the microchip shortage, including prioritization of its most popular models, namely its full-size trucks and SUVs. General Motors has also opted to produce certain models in an incomplete state, only to complete those models at a later date once additional microchip supplies have been sourced.