Is Rubber the Next Shortage Threatening the Auto Industry?

After hybrid and EV batteries, semiconductors, select metals and even seat foam, the auto industry could rapidly be facing a shortage of tires. Global rubber supplies are running critically short, some analysts warn.  

Demand for rubber gloves and packaging tape has increased significantly during the pandemic, and supply has also been depleted by drought, floods and a leaf disease in the top-producing countries such as Thailand and Vietnam.

• Also: Electric Motor Shortage Threatens Hyundai, Kia EVs
• Also: Chip Shortage Forces GM to Build Dirtier Trucks

Meanwhile, as the world’s biggest auto market and top consumer of natural rubber, China took advantage of low rubber prices and a recovery in its economy last year to make substantial purchases. There are currently no stockpiles in North America, where some auto suppliers are scrambling to secure shipments before the market gets squeezed further.

It’s kind of like paper towels early on during the COVID-19 pandemic.

Remember that rubber is also used to make seals, mounts and anti-vibration components in vehicles.

Ford and Stellantis (formerly known as FCA) have told Bloomberg they’re monitoring the rubber situation but have yet to be impacted. General Motors says it isn’t worried about its rubber supply for now.

“It’s definitely tightening up,” according to a spokesperson for Foley and Lardner LLP, which represents auto parts manufacturers. “It’s nowhere near the level of the chip shortage from our perspective so far, but it’s definitely brewing.”

Natural rubber prices recently hit a four-year peak at about $2 a kilogram and could top $5 in the next five years, people in the industry have admitted.