Global chip shortage to cost automakers $110 billion in 2021: AlixPartners

In a report consulting firm AlixPartners said, the global shortage of semiconductors is likely to cost automakers $110 billion in lost revenues in 2021, up from a previous estimate of $61 billion. It expects the crisis to effect the production of 3.9 million vehicles.

On Friday the firm said, the supply crunch of chips has driven home the point that automakers need to be “proactive” and create “supply-chain resiliency” in the longer term to avoid any future disruptions.

In the past, automakers had direct supply agreements with producers of select raw materials, such as precious metals including platinum, and palladium that are used in exhaust scrubbing systems. This direct approach method came about following a supply and price disruption in that market.

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

“These things are shocked into existence,” said Wakefield. In the past, automakers have been reluctant to make long term semiconductors or other raw materials purchase commitments since they involve undertaking financial liabilities for such agreements, said Wakefield while adding, now, “the risk is real. It’s not a potential” risk of losing production to semiconductor shortages.

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