Paul van Gerven
21 September 2022

The lack of chips will cost the European car industry 100 billion euros in 2021 and 2022, credit insurer Allianz Trade estimates. The shortfall is the result of carmakers and their suppliers slashing semiconductor orders when the pandemic hit in 2020, only to find out that demand for cars recovered faster than expected. By then, chip manufacturers had reallocated production capacity to other end-markets, leaving little capacity for the automotive sector. After signs of improvement, recovery was also hampered by supply chain disruptions caused by continued lockdowns in China and Russia’s invasion of Ukraine.

vehicle production
Automotive recovery has been slower in Europe compared to China and North America. Credit: Allianz

Allianz’s calculations show that more than 50 billion euros were lost in 2021, the equivalent of 0.4 percent of the region’s GDP. Assuming European production recedes by another percent in 2022, another 47 billion euros could be lost, making a total of 98 billion euros. On the bright side, historically low inventory levels at retailers suggest that there could be a large upside potential if production resumes in 2023.