The global chip shortage did significant damage to the automotive industry and inflated the price of new and used cars. It is safe to say that many parties want to avoid another shortage. Considering the impact that the shortage had on the economy, the U.S. government is just as interested in avoiding it as well.
U.S. House representatives want to allocate $52 billion to avoid another chip shortage
Reuters is reporting that a bipartisan group of 38 lawmakers from the U.S. House of Representatives is pressing the leaders of Congress to push forward legislation that would provide $52 billion for promoting semiconductor production in the United States. $2 billion of that amount would be allocated specifically to chips used by automakers.
The $52 billion is part of a larger spending plan being pushed by the Biden administration to help the United States compete with China in tech manufacturing. So far, the legislation is stalled in the House of Representatives.
The 38 House members trying to push the spending bill through wrote a letter warning of “dire consequences the automotive industry as a whole – and the nation – faces if we fail to advance legislation soon.”
That may sound like hyperbole, but considering how often American automakers have had to shut down plants or delay vehicles in recent months, the sentiment in the letter may be correct.
The letter is led by U.S. House members Debbie Dingell and Fred Upton, both from Michigan, the home of the “big three” American automakers. Dingell is a Democrat, and Upton is a Republican. The letter explained that the “ongoing semiconductor shortage is hurting the automotive industry, American workers, and our nation’s competitiveness by the hour.”
The letter also warned, “If this shortage is further prolonged, we fear more assembly plants will be faced with temporary shutdowns or long-term disruptions.”
Automakers have had to reduce new car production so much that it has caused the used car market to inflate significantly, making it difficult to purchase a vehicle new or used for a reasonable price.
How are car manufacturers are handling the semiconductor shortage?
The automotive industry has endured the chip shortage for nearly a year. In that time, automakers have learned from the experience, and some took measures amid the shortage to avoid production pauses.
Tesla avoided the shortage by reprogramming the software in its vehicles to work with chips that were readily available. Hyundai allegedly saw the semiconductor shortage coming and stocked up on them before they became scarce.
Some automakers may produce their own semiconductors
Despite Hyundai Motors achieving record sales in the heights of the chip shortage, it is looking to protect itself in the event of another shortage in the future. The Korean automaker plans to lean on its parts division, Hyundai Mobis, which has plans to construct a semiconductor manufacturing facility. With the in-house production of semiconductors, Hyundai Motors will be less reliant on third-party suppliers.
Should the bipartisan spending bill make it through the House and Congress, the $54 billion could result in American automakers following Hyundai’s lead and investing in their own semiconductor production.
We think it is safe to speculate that several car manufacturers will send their best lobbying teams to back up the 38 U.S. House representatives trying to get the spending bill passed.