How a Chip Shortage Is Battering the Automotive Industry

Mauricio Palos | Bloomberg | Getty Images

A shortage of semiconductors is inflicting pain on the automotive industry, forcing companies to cut production and leaving dealers with reduced inventory.

Industry analysts estimate the shortage could cost the entire industry $110 billion, almost doubling a previous estimate of $60 billion. That includes automakers, suppliers and dealers, among others.

In early 2020, automakers were reeling from production slowdowns due to Covid-19 pandemic lockdowns and safety measures.

In the meantime, the semiconductor industry was flooded with demand for chips from the consumer electronics industry. Homebound consumers were buying new entertainment systems, video game consoles and other gadgets to help them pass the time.

Then, car factories hummed back to life. But the semiconductors automakers need for infotainment systems, engine control systems, and countless other functions, weren't there.

Automakers are now scrambling to get the chips they need. The ordeal has also forced them to face a fragile semiconductor supply chain that analysts say has been a looming threat for years.

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