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Supply chain snags may cost automakers $210 billion this year

automotive
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Global automakers could lose $210 billion in revenue this year because of supply chain disruptions, nearly double a forecast earlier this year, consulting firm Alixpartners said on Thursday.

Alixpartners attributes a part of this problem to a shortage of semiconductors in a new forecast. High prices and tight supplies of commodities such as steel and plastic resin are leading to a surge in costs and forcing automakers to curtail production.

Automakers are on track to lose production of 7.7 million vehicles in 2021, according to the new forecast. Alixpartners advises automakers on supply chain and other issues.

The firm in May, predicted automakers would lose $110 billion in revenue and fall 3.9 million vehicles short of production plans for the year.

The forecast comes amid warnings from automakers and commercial truck manufacturers that semiconductor shortages and commodity price spikes are not easing as 2021 heads into its final months, as industry executives had hoped they would.

Last week, IHS Markit slashed its global auto industry production outlook for 2021 and 2022.

In the U.S. market, vehicle sales have begun to retard because inventories on dealer lots are around 20 days’ supply, less than half the normal levels, said Dan Hearsch, a managing director in Alixpartners auto practice.

Supplies of semiconductors have been hit in the past few months by a COVID surge in Malaysia, which has hobbled production at important suppliers.

Global business leaders convene on a vast array of topics ranging from sustainability and the geo-political outlook to emerging business trends.

Backlogs at major U.S. ports are hindering efforts by auto manufacturers to import more plastic resins and steel, he said.

In response, automakers are committing to longer contracts to lock in supplies, buying as much as 40 to 50 weeks in advance, Hearsch said.

“They are signing up for things they would never have done a year ago,” he said.

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