Chip shortage to cost automakers $110 bn in revenues in 2021: AlixPartners

(Reuters) – The global semiconductor chip shortage will cost automakers $110 billion in lost revenues this year, up from a prior estimate of $61 billion, consulting firm AlixPartners said, as it forecast the crisis will hit the production of 3.9 million vehicles.

The chip crunch has driven home the need for automakers to be “proactive” right now, and create “supply-chain resiliency” longer term to avoid disruptions in the future, the firm said on Friday.

Automakers have in the past had direct supply agreements with producers of certain raw materials, including precious metals such as palladium and platinum, used in exhaust scrubbing systems.

The more direct approach to securing precious metal supplies was launched after a supply and price disruption in that market.

Automakers are now looking at developing direct relationships with semiconductor makers, said Mark Wakefield, co-leader of AlixPartners’ global automotive practice.

“These things are shocked into existence,” he said.

Automakers have been reluctant in the past to make long term commitments to buy semiconductors or other raw materials and take on the financial liabilities for such agreements, Wakefield said.

Now, “the risk is real. It’s not a potential” risk of losing production to semiconductor shortages, he added.

Separately, Ford Motor Co said on Thursday it is redesigning automotive parts to use more accessible chips, in response to the global semiconductor shortage.

 

(Reporting by Ankit Ajmera in Bengaluru and Joe White in Detroit; Editing by Amy Caren Daniel)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor