Inside the industry: the indirect impacts of the chip shortage

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When times are tight, money is king – and for many automakers, with the milestones of the chip crisis, the pandemic, rising commodity costs and other drag-and-drops behind them, times are never. been tougher.

But as they continue to tighten the screws, reducing spending in every way imaginable, from squeezing suppliers to cutting marketing, it spares those involved in the ripple effect a thought. Around 150,000 people work directly in the manufacturing industry in the UK, but at least five times that number have jobs that are directly dependent on buying, selling and servicing cars, and a huge multiple of this benefits from taxes, spending. and more generated as a result.

So as we marvel at the record profit margins coming out of many manufacturers and retailers as they try to optimize a crisis, consider the litany of industries caught in that spending freeze. For a short time, the cars were prepared for semiconductors to be inserted later; now in many cases they are simply not being realized.

As a result, it seems almost inevitable that the auto industry is lagging behind in terms of its post-pandemic recovery. Globally, automotive accounts for around 3% of all economic output, but in the UK and Germany, for example, automotive exports are considered the most economically valuable production, except none. For many nations, if automotive is suffering, so are they – and on this occasion, there is no obvious solution but to smile and bear it.

The balance sheet for the last quarter underlined this alarm. Low points include Jaguar Land Rover revealing it has pending orders for 125,000 cars it cannot produce and BMW and Mercedes indicating the semiconductor crisis may not be fully resolved until 2023. Although these order banks are a sign of good times to come, this is cold comfort for companies going to the wall or workers facing layoffs now.

Remember, too, that it was exactly this kind of steadfast saving that caused the crisis in the first place. Semiconductor orders were cut because no one was buying cars, with little or no consideration for suppliers to find deals elsewhere. Could it happen again?

On a small scale, stories are already circulating of high-precision, highly-skilled engineering firms diversifying into new areas.

Nor will the turbulence faced by the auto industry end when the supply of semiconductors increases Commodity prices are rising across the board, the specter of electrification remains and how we buy, own and drive cars is up for debate. .

There is a huge opportunity in that change, but how many will be willing to wait to seize it?

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