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Auto industry facing long-haul ride

Tempe, AZ – For nearly a century, automakers worldwide have prepared to compete in what enthusiasts call “the most thrilling 24 hours in motorsports,” France’s Le Mans race. Since its inception in 1923, drivers and car manufacturers have used the endurance race as the measure for proving a car’s craftsmanship, handling, and sustainability under arguably the most grueling racing conditions. 

Over its history, winners have emerged from France, Italy, Britain, the U.S., Germany, and Japan. The past six wins have gone to hybrid prototypes, relying on petroleum and electric batteries. Each win is attributed to the cars, the drivers, and the companies’ ability to see furthest down the road, predicting hairpin turns, while avoiding obstacles.

Never has that expertise been more appreciated than now as auto manufacturers carefully drive through a gauntlet of challenges while navigating the fallout from an 18-month-long global pandemic while at the same time negotiating demands to convert combustible gasoline engines to clean energy in record time. 

Pandemic casts shadow over 2020 sales

In late January of last year, just as news of COVID-19 shutdowns in China began to spread, J.D. Power and LMC Automotive predicted U.S. new car sales would drop by 18.3% in 2020.

Supply chains hit series of snags

Two months into the shutdown, that estimate plummeted to 80% and automakers cut back on supply shipments, including microchips. They are the brains used to operate hundreds of essential automotive functions from engine cooling to brake systems.  

Simultaneously, demand for microchips skyrocketed for home computers, laptops, gaming devices, and cell phones with sales climbing well into the billions of dollars. 

“The current chip shortage all starts with the unprecedented demand for personal computers and peripherals as the globe worked and attended school from home,” semiconductor industry expert Patrick Moorhead told CNBC News

By the second quarter of 2020, new auto sales had dropped sharply, but only by 34%. 

Unexpected auto demand rises

Cooped up consumers flush with COVID-19 stimulus checks in-hand found that dealers, short on new car deliveries, had plenty of used car inventory. SUVs and trucks.

By the time auto manufacturers predicted fourth-quarter vehicle sales would climb, microchips, needed to fill those new car orders, were as rare as a Peugeot winning at Le Mans. 

Making matters worse for the auto industry, when COVID-19 hit, those specifically advanced microchips were no longer being manufactured in America. Asia had taken the lead in the nanotech industry; most notably, Taiwan Semiconductor Manufacturing Company, Limited (TSMC), the world’s largest and most advanced microchip manufacturer specializing in nanochips.

American chip manufacturers unprepared

The original microchip producer and the U.S.-based Intel Corporation lost the chance to work with Apple when it chose to remain focused on its original personal computer chips. That decision contributed to the leading microchip maker falling to 45th on the Fortune 500 tech industry list in 2020.   

It is making a comeback as U.S. President Joe Biden moves on his $50 billion plan to revive domestic microchip production. By raising the corporate tax rate by 7% and applying higher penalties on foreign corporate earnings.

Intel’s CEO Pat Gelsinger suggested opening manufacturing plants to auto chip designers to immediately ramp up domestic production. The plan involves building and outfitting new American-based foundries, including two in Arizona, and expanding existing plants to catch up to demand, but he warns it won’t happen instantly. 

“We do believe we have the ability to help,” Gelsinger told the Washington Post. “It just takes a couple of years to build capacity.” 

TSMC & Intel expand chip production in Ariz.

Meanwhile, TSMC is prioritizing expansion on a nanochip manufacturing plant already under construction in Arizona so that 12-inch wafers are ready to ship by 2024. 

“They have all understood that the shortage in auto chips has created a big impact,” Taiwan's Economic Minister Wang Mei-hua explained on NPR, “They are willing to adjust the order fill rates of auto chip customers so that the order rate for auto chips is higher than that of other product categories.”

For their part, automakers like Chrysler, GM, and Ford are reducing and closing manufacturing factories across North America and Europe. 

Auto manufacturers make own corrections

Looking in the rearview mirror, Japan’s automakers are reevaluating their own systems. Nissan’s Chief Operating Officer Ashwani Gupta is among the leadership deconstructing how manufacturers drove blind into the shortage. 

“The semiconductor crisis is one that everyone in the world could have avoided,” he told Bloomberg Business. He blames the auto industry’s multi-tiered hierarchy for creating too many layers between upper management and suppliers on the front lines where warning signals were clearer. 

“We often don’t know the risks down there,” he reflected on the industry’s common chain of command structure. With a $60 billion hit expected for the auto industry in the first half of 2021, Gupta assured that Nissan has learned from its own mistakes. 

Record natural disasters compound shortage

Adding to the troubles, the rubber industry was already suffering its own supply shortages.  On March 23rd, a trapped shipping vessel plugged passage through the Suez Canal for six days. The African-Asian route provides a pathway for nearly a third of the world’s container traffic each year. 

Add to it that China began stockpiling rubber supplies as news of a fungal disease in Central and South America’s rubber tree forests emerged. It has created another shortage for auto manufacturers needing tires, hoses, electrical sheaths, and gaskets. 

Six months after petroleum plants in the Southeast had scaled back production due to the pandemic, a string of tropical storms began battering the Gulf Coast. Hurricane Laura in late August, followed by Hurricane Sally in September forced all petrochemical factories to shut down along the West Texas to Louisiana shorelines. It cut off 15% of the U.S. market’s polyethylene (PE) and polypropylene (PP) chemicals, the key ingredients used in more than half of the construction in each vehicle, from car seats to plastic taillights.

Then, in mid-February, a freak cold snap hit the west Texas region shutting down 80% of its oil production where pipes and valves lay only inches beneath the normally warm climate soil. 

Man-made disasters pile on problems

Three months later, on May 7, 2021, as a record number of vaccinated Americans were preparing to hit the road for summer, a cyber-attack on the East Coast’s largest gasoline supplier, Colonial Pipeline, headquartered in Georgia, was forced to shut valves cutting off 2.5 million barrels of daily petroleum needed for fueling U.S. trucks, cars, and jets. 

The series of shortages comes as auto manufacturers race to meet zero carbon emissions standards over the next decade. It’s a move taking on heat as the U.S. ducks in and out of the Paris Climate Accord, including down-shifting relations with China, the world’s lead producer of rare mineral extracts needed now more than ever to make lithium batteries for electric vehicles (EV’s). The Center for Strategic and International Study estimates China produces 85% of the world’s rare earth oxides and 90% of its rare earth metals, alloys, and permanent magnets. 

In an editorial for The Plain Dealer, Geologist and petroleum expert Robert Chase claims the U.S. has squandered trillions of dollars worth of mineral rights beneath its own soil. 

“The scars of the energy crisis of the 1970s should be all the reminder we need,” he warned, and while domestic mining has withered, “import reliance has doubled in just the past 20 years,” when the need at home is greatest. 

In February, Biden signed an executive order asking for an extensive review of America’s domestic supply chains in rare earths and microchips. One month later, the Department of Energy announced it will spend $30 million researching and securing the U.S. domestic supply chain for rare earths like cobalt, lithium, and other important minerals needed to make lightweight electric batteries.

Alternative routes to a resolution

Scientists are also exploring alternate routes for reducing cobalt dependency. For EV’s, that road is nickel. With its largest reserves in U.S.-allied countries Indonesia, Australia, and Brazil, it is limited -yet touted - for its recyclability. When used with lithium-iron-phosphate elements, geologists predict nickel can reduce the need to import rare earths from China. A market analyst at Fitch Solutions estimates Tesla will soon move to a higher nickel content cathode and LFP (lithium, iron/ferrous, phosphate) battery, making the need for cobalt obsolete. 

In the meantime, President Biden’s infrastructure plan installs half a million electric charging stations along designated highways, bolstering 12 states’, including Hawaii, that have already committed to 100% zero-emission vehicles by 2035. 

Auto manufacturers like General Motors and Honda are on the list to make electric-only vehicles by 2035 and 2040, respectively. A lane over, Volkswagen has committed to steer away from building internal combustion engines and focus on turning 70% of its European VWs and Audi auto brand sales to fully electric vehicles by 2030. The other chunk of production will continue building combustible engines, with an aim to keep all Porsche vehicles, old and new, relevant and on the road. 

During February’s unveiling of the new 911 GT3, Porsche’s vice president Frank Walliser explained why they prefer adapting synthetic fuels to existing combustible engines over transitioning to EV engines.“Synthetic fuel is cleaner and there is no byproduct and when we start full production we expect a CO2 reduction of 85 percent,” Walliser told attendees.

Investing $24 million into research and development, Porsche paired up last year with Arizona-based Siemens Energy, Inc. to lead the way in carbon-neutral gas. 

For geologists like Professor Chase, finding alternative resources and developments cannot come soon enough.“Waiting for China to flex its minerals muscle or swallow the EV industry whole before taking action,” he warned, “would be an error of stunning proportions.” 

Auto manufacturers surviving the past year and a half of COVID-19 fallout are adapting and reinventing themselves, much like an expert driver at Le Mans navigating on a long and curvaceous path. The ones checking the rearview mirror for history, and the horizon for opportunities and challenges ahead, will eventually roll into a formation finish, stronger as an industry and offering better products and services for consumers in the end.

About the author

Holliday Moore

Holliday Moore

Holliday Moore is a national award-winning broadcast writer and reporter, who also teaches at the Cronkite School of Journalism at Arizona State University. She can be reached at

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