auto industry feels continued chip shortage pinch
Detroit, Friday, 13 June 2025.
the automotive sector continues to struggle with a global semiconductor shortage in june 2025. manufacturers such as general motors are adjusting production. consumers face higher prices and longer waits. a major factor is the shortage of rare earth magnets, essential for sensors and other car components. chinese export restrictions led to ford pausing production of explorer suvs. maritime auto imports to the us have plunged 72.3% since may 2024. analysts predict the chip shortage could ease by the end of 2025.
Production adjustments and market impact
The ongoing chip shortage forces automakers to make continuous adjustments to production schedules [1]. Toyota announced expected global production in November to be around 800,000 vehicles due to the chip shortage [3]. This impacts the availability of vehicles and potentially affects revenue forecasts for major automotive companies. Investors should monitor production updates from companies like GM and Toyota, as these announcements can influence stock prices [3]. These reductions highlight the fragile state of the automotive supply chain and its vulnerability to external factors [1].
Rare earth magnet scarcity adds pressure
Adding to the semiconductor woes, the shortage of rare earth magnets presents another challenge for the automotive industry [2]. These magnets are used in various car components, including sensors and anti-lock braking systems [2]. China, a major supplier of these materials, had imposed export curbs, leading to shortages for US manufacturers [2]. Recently, China approved export licenses for some suppliers of US automakers [2]. This approval could ease some pressure, but investors should remain cautious about potential supply chain disruptions [alert! ‘licensing approvals are subject to change’].
Tariffs and rising costs affect profitability
Increased tariffs on steel and aluminum by the Trump Administration are contributing to rising costs for manufacturers [2]. A New York Federal Reserve study indicated that 77% of service firms and 75% of manufacturers have passed on at least some tariff-related price increases to clients [2]. More than 35% of manufacturers raised prices within a week of tariff-related cost increases [2]. These rising costs, combined with production cuts, could squeeze profit margins for automotive companies [2]. Investors should analyze company financial reports for the impact of tariffs on profitability.
GM’s response and strategic shifts
General Motors is actively working to strengthen its North American manufacturing and supply chain [2]. GM CEO Mary Barra stated the company is taking steps to bring more manufacturing back to the US, including an $888 million investment in a New York propulsion plant [2]. Furthermore, GM announced that North American factories that had halted production due to chip shortages would resume production from November 1st [3]. These strategic shifts signal a long-term plan to mitigate supply chain risks, which could positively influence investor confidence [2][3].
BYD’s pricing strategy and market disruption
BYD is employing an aggressive pricing strategy that is disrupting the automotive market [4]. BYD’s price cuts have significantly impacted the market value of joint venture brands [4]. For example, the price of a Toyota Corolla fell from ¥180,000 in 2022 to ¥80,000 in 2025 [4]. Similarly, a BMW 3 Series price decreased from ¥360,000 in 2022 to ¥210,000 in 2025 [4]. This price war is forcing other automakers to lower prices, potentially impacting their profitability. Investors should monitor BYD’s strategy and its effects on the broader automotive market [4].