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Auto sector hit by $210bn in lost revenue from mounting supply chain disruptions, says AlixPartners

Supply chain disruption caused by the worldwide shortage of semiconductors is estimated to cost the global automotive sector $210bn in revenues this year, according to consulting firm AlixPartners.

But it said “chips are just one of a multitude of extraordinary disruptions the industry is facing right now”.

Estimated losses facing the automotive industry have almost doubled since the last forecast from AlixPartners of $110bn in May. It said 7.7 million units of vehicle production are now expected to be lost in 2021, up from a forecast of 3.9 million.

Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners, said hopes that the chip crisis would have calmed by now have fallen by the wayside. He said problems have been “exacerbated” by Covid-19 lockdowns in countries such as Malaysia. But shortages of other key materials are also adding to the supply chain disruption, said Mr Wakefield.

“Chips are just one of a multitude of extraordinary disruptions the industry is facing – including everything from resin and steel shortages to labour shortages. 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,” he said.

Dan Hearsch, managing director in AlixPartners’s automotive and industrial practice, said “there really are no ‘shock absorbers’ left in the industry right now”, when it comes to production or sourcing materials. He said the global nature of automotive production is causing disruptions throughout the supply chain.

“Virtually any shortage or production interruption in any part of the world affects companies around the globe, and the impacts are now amplified due to all the other shortages,” Mr Hearsch said.

“That’s why it’s critical that companies be armed with good information and analysis to begin with, and that they follow through with flawless, determined execution,” he added.

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