Delivery bottlenecks are the symptom, but not the cause of the problem

Delivery bottlenecks are the symptom, but not the cause of the problem

After the game is before the game. They say in football. After the crisis is before the crisis, you have to say in business. True to the motto “The next crisis will definitely come”. It is remarkable that one, the corona pandemic, is not even over yet, but the other, namely global supply bottlenecks for important raw materials and components, is already raging. In fact, the two are connected, but structural deficits are also becoming clear, which are to a certain extent home-made, especially in Europe.

But first things first: In 2020, the auto industry suffered from a slump in sales, now that the economy is recovering and demand is even booming again in some cases, not enough vehicles can be delivered. The reason is supply bottlenecks for microchips. Demand from the automotive industry had been increasing for chip producers for years - then it collapsed dramatically as a result of the Corona crisis. Due to declining orders, many companies had reduced their orders. The consequence: Many semiconductor manufacturers found new buyers - from areas that were booming during the Corona crisis, such as IT, consumer electronics or medical technology. On top of that, China has already met the increased demand for cars with increased production thanks to its comparatively early upswing after the first Corona wave.

Chip shortage costs car manufacturers 91 billion euros

The bottlenecks are likely to cost the auto industry dearly this year. The consulting firm Alix Partners estimates that around 3.9 million fewer vehicles will be produced worldwide in 2021 due to the chip shortage. That corresponds to a value of around 110 billion dollars (91 billion euros) - almost twice as much as was estimated at the end of January.

First there was a lack of demand, now there is a lack of supply. Just unlucky in this historic crisis? No, the mischief lies deeper, a lot of it is homemade. The Corona crisis made it clear how vulnerable the global economy is and how dependent the globalized world is on functioning supply chains. Especially the auto industry with its just-in-time deliveries. Just don't build up storage capacity!

A leather steering wheel traveled halfway around the world 20 years ago before it was installed in the vehicle in Mexico or somewhere else. The leather had to come from German cows, for example with German premium brands, but it was processed in Eastern Europe and sewn together somewhere else.

But the dark side of globalization is now becoming clear elsewhere too: in Austria, a country that is half forest, construction wood is suddenly in short supply. Because the logistics chain was interrupted by Corona, a shortage of freight containers and the blockage of the Suez Canal, but at the same time booming markets such as China and the USA are again literally sucking up stocks on the global market.

Europe has – we have to be honest – less and less to offer. The major growth markets are in distant countries, as are the raw material reserves. And as a technology location, Asian economies, along with the USA, are already ahead. For example, China and Co. are world leaders in the development and production of batteries for electric cars. In short, Asian economies are no longer just the world's workbench, but rather technology hot spots and important sales markets. China is already the largest car market in the world. The USA, on the other hand, has Silicon Valley, its political and military power and an equally strong, if not quite as dynamic, domestic market. 

Nothing works without China

Experts and politicians who, such as Economics Minister Margarete Schramböck, are now calling for the domestic economy to become more resilient and self-sufficient and are calling for a certain emancipation from China seem almost naive. The following statistics underline how dependent the global economy already is, especially on China: The ten largest container ports in the world are now all in Asia, seven of them in China (including number one, Shanghai). Hamburg, once a regular in the top 10, is now only in 19th place. This train seems to have left the mark, Europe has missed the boat. 

Of course, a certain regionalization as a counter-trend to globalization - the artificial word "glocalization" is used here again and again - is appropriate and also quite feasible. This includes building up storage capacity in order to be able to better cope with short-term delivery failures. It is also important to question whether everything really needs to be manufactured overseas. Especially since this is ecologically absurd. But politics must also create the framework conditions and make the business location attractive.

Car manufacturers would do well to have some humility - also when dealing with their suppliers. Compared to computer and cell phone manufacturers, they are relatively small buyers in the chip industry. Around eight percent of all semiconductors produced worldwide go into cars, which corresponds to the demand of the US company Apple alone.

And yes, at the end of the day the consumer will have to pay more. But do we really need to buy jeans for just 30 euros? Or a car at a price where the dealer doesn't make any money? We all have to rethink.