A lack of computer chips means that car companies have not been able to meet production demand.Image: REUTERS/Andreas Gebert
Sean Fleming Senior Writer, Formative Content
- Global car sales fell in 2020.
- A shortage of computer chips is compounding poor sales by holding up production.
- That could cost the industry $60 billion.
Besides reeling from the impact of the COVID-19 pandemic, the motor sector now faces another major challenge – it can’t get all the computer chips it needs.
Modern cars are reliant on technology. There’s software that monitors engine performance and emissions, cruise-control that automatically adjusts to keep pace with the speed of the vehicle in front, alarms that are triggered by straying out of lane – not to mention bluetooth connectivity, parking sensors, keyless entry and a host of safety features.
And that’s just in a conventional car. Self-driving and semi-autonomous cars are even more tech-laden.
Chips with everything
The global shortage in supply of semiconductors has caused headaches for other sectors too: from mobile phones and games consoles to 5G-ready industrial and commercial equipment.
Apple faced potential production challenges to its new iPhone 12 model last year, according to Bloomberg. The handset is one of the latest generation of 5G-enabled phones. While shortages of consumer technology grab headlines, a lack of chips risks exacerbating other issues.
As one of the keystones of the Fourth Industrial Revolution, technology like 5G play an important part in helping some of the UN’s Sustainable Development Goals come to fruition. Several of the SDGs are dependent on technology, like Good Health and Wellbeing (SDG3), Industry, Innovation and Infrastructure (SDG9), and Sustainable Cities and Communities (SDG11).
Pre-pandemic, global car sales were on track to be around 80 million vehicles for 2020. But that is expected to have fallen to 64 million, according to Statista.
“South America and Europe were among the hardest-hit regions, with auto sales in these regions contracting by about one-fourth year-on-year,” the data journalism site says.
That situation has been compounded by the lack of available chips, meaning cars aren’t rolling off the production lines fast enough and therefore aren’t being sold.
The damage done to global car sales by the lack of technology components is estimated to be around $60 billion, according to a report from CNBC.
“All the way up and down the supply chain, everybody is out some portion of money,” Dan Hearsch, a managing director at consulting firm AlixPartners told CNBC. “This could be 10% of global demand this year, its impact, which craters the recovery. We don’t think we’re overstating this.”