All the troubles in the auto industry: it’s not just the chip crisis

For the automotive sector, the future remains uncertain: not only the lack of chips, but also difficulties in starting electric vehicles, obscuring growth. What future for the auto sector?

The auto sector is still under pressure in this phase of recovery from the insurance crash of the pandemic.

This sector has been hit hard by lockdowns and slump in demand and is now facing all the obstacles of the global recovery at a full growth rate.

Shortage of semiconductors , ever higher prices of basic raw materials and slow supplies also risk jeopardizing the launch of electric vehicles . The latter is a sector on which the major car manufacturers are focusing in view of the energy transition.

All the troubles of the automotive sector : what future for the sector?

From the chip shortage loss of $ 210 billion for the auto industry

The first major challenge facing automotive companies around the world is the shortage of semiconductors.

The shortage is such that several factories have already slowed down or closed production, from the USA to Europe.

Against this backdrop, consulting firm Alixpartners has worsened forecasts, estimating a $ 210 billion loss in revenue this year due to supply chain disruptions. In May, the decline in turnover was estimated at $ 110 billion.

With the updated outlook, automakers are on track to lose production of 7.7 million vehicles in 2021.

The chip shortage and spikes in commodity prices is not is becoming blurred and IHS Markit last week reduced its outlook for the global automotive industry production for 2021 and 2022.

A perfect storm is hitting the world sector. There is not only the difficulty of procuring semiconductors. The shortage of steel and plastic resin is also undermining production.

The wave of infections in Asia, with peaks in countries such as Malaysia, has not helped the sector, which is heavily dependent on chips supplied by this area.

Obstacles for electric vehicles

The knot of scarce and expensive raw materials is by no means solved even for the promising electric car market .

More and more large European and other companies are looking for solutions to obtain valuable materials for electric cars without depending on China.

The rare earths , for example, are emerging as a concern in the transformation of electric cars. The vehicles of the future require large quantities of raw materials for batteries such as lithium, nickel and cobalt, and car manufacturers such as BMW AG, Volkswagen and Tesla are in trouble.

China, which controls two-thirds of mining and 85 percent of rare earth refining, according to BloombergNEF, is expected to use much of that raw material domestically.

For this, several European companies try to conclude contracts with other suppliers, such as the Australian rare earth explorer Arafura Resources Ltd.

BMW and General Motors have also tried to reduce the amount of rare earths in vehicles, thinking of alternative engines that are less efficient.

Europe is on high alert as it is on its way to becoming the largest consumer of electric car parts .

Last year, the EU established the European Raw Materials Alliance to ensure a sufficient supply of critical raw materials that fuel the world’s most ambitious climate change plan. In rare earths , the alliance has identified 14 projects in Europe for an investment of 1.7 billion euros.