Lost Cause

Image source: Pincasso - Shutterstock

What's going on?

Data out on Thursday suggests the ongoing chip shortage will cost global automakers $210 billion this year, but those lost sales must be around here somewhere.

What does this mean?

As if it wasn’t hard enough for carmakers to get their hands on microchips after all the pandemic mayhem, one key supplier in Asia has just been crippled by a major fire, while others have been hit by a new wave of coronavirus outbreaks. The delays are now so bad that it took a record 21 weeks to deliver chip orders in August.

That’s left stockpiles of new cars nearly depleted and carmakers reliant solely on almost non-existent production. It’s a problem they’ve warned could go on for years, and an expensive one to have: one research consultancy just said it thinks the industry will lose $210 billion in sales this year alone – almost double its last estimate in May (tweet this).

Why should I care?

The bigger picture: Fool carmakers twice…
Carmakers rely just as heavily on lithium and nickel in their electric vehicle production, and they aren’t going to make the same mistake twice. They’ve noticed that China – which controls two-thirds of the supply – is looking to keep more for itself, so they’ve been in talks to secure supplies from a new Australian project that’s looking to cover as much as 10% of global demand.

For markets: This one’s on you.
The supply chain is pushing up costs far and wide, with data out on Thursday showing business costs in the eurozone rose at their fastest pace in more than 20 years. That leaves companies with two choices: either grit their teeth and take the hit, or start passing these costs onto you. And if they choose the latter, you won’t be the only one footing the bill: Germany, France, and Spain have all reported a slowdown in economic growth in the last few months, and that won’t pick up anytime soon.

Originally posted as part of the Finimize daily email.

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