Material shortages have caused supply chain issues for a number of industries, and the automotive industry has been no exception.
Your vehicle, like many other devices, relies on computer chips to operate. Thanks to the tech boom, these chips were already in short supply when the pandemic further exacerbated the situation.
But how exactly did we get to this shortage of computer chips (and cars)?
- Industry Shutdown: In March 2020, the pandemic forced auto manufacturers and dealerships to shut down. Automakers canceled orders for computer chips, also known as semiconductors, because they expected sales to fall. But demand remained high, and dealers adapted to safety protocols via online sales and no-contact pickup and delivery.
- Computer Chips Harder to Acquire: Lockdowns forced a shift in our culture. Remote work and education became the norm, increasing the demand for personal electronics. Meanwhile, stockpiling within the tech industry and issues like natural disasters further complicated things.
- Automotive Production Halts: The chip deficit has forced automakers to limit certain features or stop producing vehicles entirely. They’ve given priority to more profitable vehicles, and thousands of cars await chips before they can be shipped to dealers, forcing buyers to wait.
- Prices Increase: Strong demand coupled with severely limited inventory has driven prices up. In June 2021, the average listing price had increased 5.5% from the previous year (and 10.3% from 2019). Fewer new cars also means fewer trade-ins, driving used car prices up as well.
- Shortages Continue: Experts are predicting the chip shortage will last well into 2022, if not longer. Meanwhile, chipmakers attempting to boost production are facing supply chain shortages of their own. Chip production, shipping costs and labor shortages are all still taking their toll, so automakers are pausing production again.
Taking care of your car is as important as ever, so reach out if you have questions about vehicle maintenance.