There are roughly around 1.2 billion cars in the world. There is always a high demand for cars across the world. However, right now car industries are struggling with production which leaves millions of workers across the world at risk for unemployment.
The auto industry is said to account for roughly 3% of the world's economic output. The supply chain crisis has severely impacted the auto industry. One of the main issues was the lack of semiconductors. They were forced to slow production or even stop it all together while waiting on parts. This puts millions of workers across the world wondering if they will be called into work tomorrow. You have the manufacturing countries of the auto industry such as the United States, Germany, and Japan scrambling. Companies such as GM, Ford, Honda, and Volkswagen are producing much less which requires fewer workers. Japan has experienced a 46% decrease in its exports this year compared to last. On top of that, it is affecting countless countries that provide parts to these large manufactures. With fewer cars rolling off the assembly line you have less of a need for tires, instrument panels, and more impacting all of those workforces as well. Germany has had to shut down some factories all together and other countries have done the same.
This issue is one that should clear up over time, but some people do not have time. They need a job now. It's a waiting game right now with the bottleneck of semiconductors and other parts that will impact how fast things get back to normal.
Source: https://www.nytimes.com/2021/11/02/business/car-shortage-global-economy.html
7 comments:
It really is a great position for semiconductors makers to be in right now, because the demand for car chips far outgrows the supply. Many people argue that the benefits they are enjoying right now are only temporary, and the price of semiconductors will fall again once the market corrects itself. However, I think that the chipmakers are they’re in a position of strength for the foreseeable future because the automobile is going digital. Therefore, demand for these high-tech chips is only going to grow.
I was going to leave a comment very similar to Hanna's, but I will expand on it instead. This is a prime example as to how firms and industries can benefit off bottlenecks. A bottleneck is a point of congestion in a production system. There are many inefficiencies brought by the bottleneck which creates delays and higher production costs. However, the demand for these microchips and semiconductors is so high, which is making the price of them skyrocket. As Hanna said, this is beneficial for those producers, but consumers and other firms are paying the price.
This is a classic case of an self correcting market. There are countless plans for microchip factories around the world due to the shortage that we are experiencing, and they will correct the market once they are operational. That does not make the wait time any easier though. This may be where governments must come in and correct the market failure and supply the unemployed with unemployment benefits in order to smooth consumption.
In the short term, I think that some companies will have to shift their focus as other areas of their businesses are actually booming. Production might be lagging behind which has caused some manufacturers like Tesla to introduce more frequent price hikes on their products. But the used car and sales side has been on the upswing to take its place as consumer demand shifts to alternatives. There might be temporary growing pains but I think things will smooth out over time.
The car industry has definitely taken a hit due to the pandemic. Fortunately though this will correct itself due to the demand of cars in the foreseeable future. There has been a shortage of many things in the car industry but they are beginning to be manufactured and produced again giving some hope to the length of when this will fix itself. The used car market has taken a terrible hit because of this, used cars are very expensive at the moment due to the demand for cars increasing.
The car industry has been facing many issues since the start of the COVID-19 pandemic. Prices for cars have risen due to lack of enough supply. It might seem like a problem only for car manufactories. However, as you mentioned in your article, it has a big impact on the economy. Companies have to close their factories, fire people, and produce less than before. This is the time when the government should step in.
In the short term, I do not see this problem changing anytime soon. In the long term, I believe the market will self-correct, once labor slowly comes back supply chain issues will slowly fix. One problem that may occur that I would be worried about is that the auto industry companies finding permanent machines to replace the vacant workers.
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