Written by Sabina Lobo
The Auto industry has long been one of the United States’ most prominent, with manufacturers ranging from Ford, to Ram, to General Motors. When analyzing the history of the automotive industry, one is automatically drawn to Detroit, better-known as “Motor City”. During the height of the COVID-19 pandemic however, while car and auto part shortages were notable nationwide, the long-term effects on this particular industry were yet to be felt. Inflation shook the industry, continuing well into the future (Singh, 2024).
From the very beginning of the Biden administration, during the heat of the COVID-19 pandemic, the United States saw one of the highest inflation rates it has experienced in modern history (Desilver, 2022). Prior to the impacts of COVID-19 on general market supply, the United States uniquely saw a period of economic stability. “For more than two decades before the pandemic, inflation was low and stable, staying near the Federal Reserve’s long-term goal of 2 percent.” (Federal Reserve, 2025). However, with the rise of COVID-19 in 2020 and 2021, mass demand for certain, disease-preventing goods caused large price disruptions. “The combined effects of increased demand for durables and shortages caused by supply-chain disruptions were the main source of inflation in the second quarter of 2021” (Bureau of Labor Statistics, 2023). In this context, commonly-demanded goods come to mind like hand sanitizer and toilet paper.
However, how were some more particularly Michigan-based industries affected? The automotive industry, historically hailing from Detroit, took a severe financial toll due to the disruption of global supply chains. In particular, a shortage of semiconductor chips was the main reason for this economic downturn. “In September 2021, the consulting firm AlixPartners forecast that the chip shortage would cost the global auto industry $210 billion in lost revenue in 2021 alone, with an expected loss of sales in 2021 of 7.7 million vehicles.” (AlixPartners, 2021). A shortage of critical automotive parts resulted in a shortage of produced cars, leading to decreased numbers of vehicles available for purchase in Michigan, in particular (Muller, 2025). Given the standard supply and demand model, a lack of semiconductor chips, while causing automotive financial loss, were driven up in cost themselves due to scarcity, demonstrating price inflation.
Grand Valley State University analyzes the US Auto Inventory to Sales ratio of 2021, demonstrating that nationally, production is significantly lower than it was pre-pandemic. The impact on the economic state of Michiganders was severe, costing many their employment entirely. For Michigan, employment in the automotive industry fell by ~8% between February 2020 and September 2021, amounting to approximately 14,000 jobs (Simons, 2021). For the same range of time, for the state as a whole, employment simply in the auto parts industry (including vehicle and parts manufacturing), fell by approximately 10%, or 12,300 jobs.
The study highlights the sheer number of Michigan automotive jobs lost due to the COVID-19 pandemic, already established to be a primary industry in the state. The study also suggests that, other than Detroit, the Michigan cities most heavily affected were Grand Rapids and Wyoming. Likely, this is the result of a correlation between city population and population of automotive workers.
While causing a deep hit to many, the post COVID-19 inflation surge saw a dramatic loss of economic opportunity, particularly in the Michigan automotive industry. Vital component shortages led to component price inflation, leading to both lost jobs and vehicle shortages felt statewide.
References
Dean, G. (2020, November 17). Hand Sanitizer Prices up 53% during COVID-19… Business Insider. Retrieved April 29, 2025, from https://www.businessinsider.com/hand-sanitizer-prices-price-gouging-bleach-toilet-paper-face-masks-2020-11
How Have the Struggles of the Auto Industry Affected the West Michigan Economy. (2022). Grand Valley State University – Seidman Business Review. Retrieved April 24, 2025, from https://publications.gvsu.edu/seidman-business-review/2022-seidman-business-review/how-have-the-struggles-of-the-auto-industry-affected-the-west-michigan-economy
DeSilver, D. (2022, June 15). In the U.S. and around the world, inflation is high and getting higher. Pew Research Center. https://www.pewresearch.org/short-reads/2022/06/15/in-the-u-s-and-around-the-world-inflation-is-high-and-getting-higher/
Yost, T. (2021, September 23). Semiconductor shortages to cost the auto industry billions. AlixPartners. https://www.alixpartners.com/newsroom/press-release-shortages-related-to-semiconductors-to-cost-the-auto-industry-210-billion-in-revenues-this-year-says-new-alixpartners-forecast/
Singh, S. (2024, April 15). The automotive industry gears up to navigate the new normal. Forbes. https://www.forbes.com/sites/sarwantsingh/2020/04/16/the-automotive-industry-gears-up-to
Muller, J. (2025, March 10). The auto industry changed forever after COVID. Axios. Retrieved May 1, 2025, from https://www.axios.com/2025/03/10/covid-auto-industry-navigate-the-new-normal/