No End in Sight 🔭

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No End in Sight

The chip shortage continues to wreak havoc on the global economy, causing significant issues for automobile manufacturers, with no definitive end to the shortage in sight.

Automobile manufacturers such as Ford, Volkswagen, and Daimler are still grappling with the effects of the chip shortage, with officials from each company warning that a scarcity of silicon is likely to persist. Executives of the struggling manufacturers say it’s difficult to tell when the crisis will be resolved.

Volkswagen had hoped that the semiconductor situation would improve after the summer holiday, but this has not happened. Instead, the coronavirus has ravaged Malaysia, where many of Volkswagen’s suppliers are situated, causing multiple plant closures.

Volkswagen CEO Herbert Diess predicts that the shortages will begin to fade as virus transmissions begin to fade worldwide, but that a general scarcity of chips would persist for some years because “the internet of things is growing so fast”, he added.

Meanwhile, Gunner Herrmann of Ford Europe predicts that the chip scarcity will last until 2024, although it’s hard to say precisely when it will end. The transition to electric cars is considered to have aggravated the shortage. A Ford Focus, for example, has about 300 chips, but one of Ford’s new electric vehicles has up to 3,000.

Other shortages have emerged in addition to chip shortages. According to Herrmann, Ford is facing a new crisis in raw materials. He went on to say that it isn’t just semiconductors that are in limited supply, but also lithium, plastics, and steel. When the cost of raw materials rises, car costs will rise as well. So, it’s possible we could be seeing car prices rise soon.

I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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