The global chip scarcity has persisted to disrupt the automotive sector as more manufacturers reveal more production reductions and temporary plant shutdowns. This problem has been a major concern to the industry for over a year now and there is no indication that the situation will improve in the near future, a situation that is worrisome to both industry players and consumers.

Jaguar Land Rover, the British luxury car manufacturer, has joined the list of companies affected by the chip shortage, saying it will reduce production at its UK factories. The company said that the shortage has made it focus on its most profitable models, thus cutting down on the production of other models. This decision is expected to affect thousands of workers and may result in longer waiting time for the customers.

Likewise, other big car manufacturers including Toyota, Volkswagen, and General Motors have also disclosed that they are still struggling with the chip deficit. Toyota, which had earlier been able to avoid some of the impacts of the crisis as compared to other companies, has also said that it may have to reduce production in the coming months. The Japanese automaker said the supply chain problems have been compounded by the recent resurgence of COVID-19 in Southeast Asia, which is an important region for the production of chips.

The cause of the current shortage can be traced back to the beginning of the COVID-19 outbreak when automotive companies scaled back their chip procurement because the demand was expected to decrease. But the sales of cars recovered faster than the expectations and the chip makers had already diverted their resources to other industries like consumer durables, 5G communication systems etc. The automotive industry is now in a position where it has to fight for the scarce chip supply with these other sectors which are also in dire need of the chips.

According to industry insiders, the chip deficit could lead to the loss of several million automobiles across the world in 2024. This deficit is not only a problem for today’s sales but also a problem for future product launches and the capacity of the industry to meet the ever-tightening CO2 standards through the introduction of electric and hybrid vehicles.

To tackle the crisis, most of the automobile companies are trying to come up with other ways of acquiring the chip. Some are even planning to alter the design of their products in an effort to minimize the use of specific semiconductors; others are planning to develop direct partnerships with chip makers in order to secure a more stable supply in the future.

Some governments of different countries also have joined the process with the purpose of increasing the production of semiconductors within their countries and minimizing the dependence on several global companies.

The current chip scarcity has exposed the automobile sector to supply chain risks and showed that semiconductors are essential in today’s cars. Since the modern cars are built to be more electronic than mechanical and more dependent on the chips, the need for chips is expected to rise. This crisis may lead to a radical shift in the supply chain management and inventory control in the industry.

For consumers, this means that they have to wait for a longer period of time to get a new car and there is also the possibility that they will have to pay more due to the limited supply of chips. A few dealerships have claimed that they are facing the lowest levels of inventory in history and some of the most demanded models are scarce. This has also created an increased demand in the prices of used cars as some consumers are forced to purchase the cars instead of waiting for the new ones.

While the automotive industry tries to solve this problem, it is evident that the effects of the global chip deficiency will be seen up to 2025 and maybe even further. The crisis may become a signal to the industry to create more sustainable supply chains and, perhaps, speed up the process of the development of new technologies that could help to minimize the use of certain types of semiconductors in the future.