The dearth of automotive chips drags on. Can the auto industry get creative?

Three ways to manage the shortage ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ 

TODAY'S NEWS. TOMORROW'S INSIGHTS. A daily newsletter from McKinsey & Company   Edited by Sarah Thuerk   Copy Editor, Atlanta Semiconductor scarcity The news • Auto opt out. The one-two punch of inflation and strained supply chains is putting a dent in the demand for autos in Europe. European passenger-vehicle sales in June were 15.4% lower than the year before, with consumers snapping up fewer than 900,000 cars. That marks the worst month of auto sales for the region in more than 25 years. Supply chain problems arising from a worldwide shortage of computer chips are largely responsible for the dip, but rising inflation also has consumers holding off on making big purchases. [Fortune] • Motor-less City. The longtime heart of the US auto industry is idling. Global shortages of semiconductors—essential components of vehicles' electrical systems—are stalling sales all over the country, including in a famed hub of car manufacturing. Some dealerships receive new cars with missing components that rely on computer chips. One dealer refers to these as "build shy," since the cars are almost ready to sell but still shy of parts. Inflation has put the cost of new and used cars alike out of reach of the factory workers who build them. [WaPo] The auto industry has quickly moved to deal with the chip shortage, but even more decisive action is necessary, especially since the situation is likely to persist far into 2023. Our insights • When the chips are down. Automakers are in a tenuous position as the gap between computer chip supply and demand widens. Many OEMs and suppliers that order car parts close to production decreased their chip orders when car sales fell in 2020. This left them low in inventory when demand for cars increased, according to McKinsey senior partner Ondrej Burkacky and colleagues. The auto sector is stockpiling chips, but producing them can take at least four months, and often longer. Overordering is also part of the problem. • Looking long term. There aren't short-term solutions for the current chip crisis, but companies can ensure their continued resiliency by developing longer-term strategies. OEMs and auto suppliers often have "control rooms" composed of procurement, sales, and supply chain staff who solve immediate chip needs. But these teams may lack the needed tools, skills, or capacity to develop lasting, strategic solutions. Explore three crucial ways to manage the semiconductor shortage in the immediate future and beyond. Build a technology road map Was this forwarded to you? Sign up here. Or send us feedback — we'd love to hear from you. Follow our thinking This email contains information about McKinsey's research, insights, services, or events. By opening our emails or clicking on links, you agree to our use of cookies and web tracking technology. For more information on how we use and protect your information, please review our privacy policy. You received this email because you subscribed to the On Point newsletter. Manage subscriptions | Unsubscribe Copyright © 2022 | McKinsey & Company, 3 World Trade Center, 175 Greenwich Street, New York, NY 10007