Why Tiny Microchips Are Crippling The Global Auto Industry And Driving Up Prices

While the automotive industry was ravaged early on in the pandemic thanks to lockdown measures and a dramatic decrease in travel, it more recently has begun facing a new problem: a shortage of microchips. Microchips are vital to much of a vehicle’s key functions, such as engine control, transmission, infotainment systems, and more. In the last half of 2020 and now in 2021, vehicle sales recovered fairly quickly, faster than automakers anticipated. Suddenly, they were struggling to meet demand. At the same time, chipmakers were experiencing supply shortages and increased demand from other sectors, such as personal electronics. With the resulting lack of microchip supply, automakers have been forced to slow production, even on their most popular models. For several automakers, the shortage is expected to cost them $1 billion or more — and even still, the alternatives are worryingly few.

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