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New report claims car industry will lose £154bn in revenue as impact of chip crisis deepens

  • Consulting firm has doubled its prediction for lost revenue as a result of semiconductor shortage
  • SMMT set to slash forecast for new car sales in the UK in 2021 again as a result of issue
  • 7.7m fewer cars will be built worldwide this year as a result of the crisis

Time 1 month ago

The ongoing semiconductor chip shortage is likely to cost the global automotive industry more than £150bn in lost revenue.

Consulting firm AlixPartners has doubled its estimate of the impact of the chip crisis on car makers from an earlier report in May. 

The firm says it is likely to now cost closer to £154bn – up from a loss of £80.5bn predicted in May.

In a new report released today, the consultancy firm said 7.7m fewer vehicles will be made this year because of the shortage.

In May it predicted 3.9m fewer vehicles would be built in 2021. 

Car Dealer recently reported some car makers were drastically changing specifications of cars to exclude some extras, handing cars over with just one key, and culling models from their ranges as they deal with the chip shortages.

Most car makers have been forced to pause or slow down plants across the world because of the shortage in chips.

The SMMT is set to slash its 2021 forecast of 1.82m new car sales as a result of the issue.

Earlier this year it predicted sales would bounce back from the lows of Covid-hit 2020, but is due to cut its forecast in an update next month.

In August new car sales fell 22 per cent on 2020.

The SMMT says total registrations in 2021 are already 25.3 per cent below the 10 year average for the period January-August which it says ‘illustrates the ongoing and wide ranging impact of the pandemic on automotive retail’.

In an update in July, the SMMT said: ‘While the UK’s economic outlook continues to strengthen, with most consumer indicators suggesting a greater appetite for spending, supply challenges continue to throttle growth.

‘As a result, the latest SMMT outlook has been revised downward and now forecasts registrations to reach around 1.82m units in 2021.

‘This is still some 11.7 per cent up on 2020, but down from the 1.86m forecast in April.’

Mark Wakefield, global co-leader of the automotive and industrial practice for AlixPartners, added: ‘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.

‘Chips are just one of a multitude of extraordinary disruptions the industry is facing — including everything from resin and steel shortages to labor shortages.

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‘There’s no room for error for automakers and suppliers right now – they need to calculate every alternative and make sure they’re undertaking only the best options.’

Although supply of semiconductors is thought to be improving, the car industry has warned it will impact supply for much of 2022 and possibly longer.

Mike Hawes, chief executive of the SMMT, said: ‘The global shortage of semiconductors has affected UK, and indeed global, car production volumes so new car registrations will inevitably be undermined.’

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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