In recent years, the auto industry has been hit by a shortage of semiconductor chips. Industry experts and surveys conducted by KPMG and the Global Semiconductor Alliance in the fourth quarter of 2022 indicated the shortage would end in 2023, with more chips than needed in 2024.

This prediction came true, thanks in part to an inflation-driven decrease in demand for electronics in 2023. Chip supply was initially freed up due to weakness in some end markets, particularly PCs, smartphones and consumer electronics, where sales began falling in March 2022. This allowed chipmakers to reallocate capacity to automobiles and industrial markets, where the demand was still high. For example, according to a 2023 preliminary fiscal report from Israeli semiconductor maker Mobileye, the company is sitting on a stockpile of microchips.

Additionally, the auto industry itself has increased its manufacturing capacity given that automakers are increasingly requiring chips with higher computing power. As a result of the increased production—and a stockpiled inventory of low-end automobile chips—automakers are now focusing on vehicles with higher profit margins, such as pickup trucks and SUVs.

The increased production of cars, not to mention the shift towards larger and heavier cars, is leading to increased overseas shipping and resulting increased factors of risk. This is due to a focus on getting inventories out to markets in demand. However, there is concern that overloading car carriers could pose safety risks—especially with the prevalence of EVs and the potential risks associated with their transport. Recent events tracked by PCS, such as the capsizing of the Golden Ray in September 2019, the sinking of the Felicity Ace in February 2023, and the fire aboard the Freemantle Highway in July 2023, highlight hundreds of millions—or even billions—of dollars in losses which affect the wider industry.