Chip Crisis Threatens to Cut Auto Output by 7.1 Million Cars

The global shortage of chip will cut worldwide auto production by as many as 7.1 million vehicles this year, and pandemic-related supply disruptions will hobble the industry well into next year, IHS Markit saidChip.

The lack of chips won’t stabilize until the second quarter of next year, with recovery coming in the second half, IHS said in a report Thursday. The grim outlook is further proof that the chip crisis is far from over. And the research firm’s forecast doesn’t include the latest cuts from Toyota Motor Corp., which plans to briefly pause output at 14 plants next month and slash production by 40%.

“The situation is still fraught with challenges,” IHS analysts Mark Fulthorpe and Phil Amsrud wrote in their report. “We are also seeing additional volatility due to Covid-19 lockdown measures in Malaysia where many back-end chip packaging and testing operations are performed.”

Low vaccination rates and rising infection rates in Southeast Asia are prompting shutdowns of plants assembling all types of semiconductors, IHS said. Ford Motor Co. said Wednesday it will idle its F-150 pickup plant near Kansas City, Missouri, next week “due to a semiconductor-related part shortage as a result of the Covid-19 pandemic in Malaysia.”

Toyota, which had stockpiled chips and previously had experienced less disruption, cited the Asian outbreak of the delta variant of the virus for its September production cuts.

“Especially in Southeast Asia, the spread of Covid and lockdowns are impacting our local suppliers,” Toyota Purchasing Group Chief Officer Kazunari Kumakura said.

IHS now sees the chip crisis reducing global auto production by 6.3 million to 7.1 million vehicles this year, not including the Toyota cuts. In the third quarter alone, as many as 2.1 million units could be lost to the chip shortage, IHS said.

The second quarter of 2022 “may be the point at which we look for the stabilization of supply,” IHS said, “with recovery efforts now starting only from the second half of 2022.”

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