Microchips are to Blame for the difficulty in finding the new car you want.
The supply of semiconductors, the technology used to make microchips, is running low, and some automakers have been forced to halt production of certain vehicles.
Both Ford, FCA and Toyota have had to adjust production schedules in North America, as have Volkswagen, Nissan, and Honda.
An industry analyst said the supply disruption could affect the availability of affected vehicles.
Suppliers’ struggles during the spring’s six-week production halt prevented a smooth return to production for automakers adapting to pandemic restrictions. Many of the issues we faced in 2020 are still present today. Microchip shortages are once again forcing automakers to reschedule or halt production in some cases.
Why are used car prices so high right now?
A small but critical component is missing from automobiles because the consumer electronics industry is claiming ever-increasing numbers of chips to meet the growing demand for electronics. This is especially true for electric vehicles, according to Gartner vice president of research Gaurav Gupta, who talked about the growing importance of semiconductors throughout the automotive value chain. In December, Continental and Bosch issued warnings about a possible shortage of semiconductors, the technology from which microchips are made.
A principal at Deloitte Consulting who works in the semiconductor segment, Chris Richard, said, “Some of these modern vehicles have thousands of semiconductors… and some of these things are probably just a nickel a piece, and some are probably $150.” Each of these cost points has the potential to put a halt to production. A five-cent part or a $150 part can put a halt to your production.”
Where do the chips for cars come from?
Currently, not all automakers have had to adjust production schedules to properly allocate the supply of microchips because of the supply crunch. Nevertheless, there are many others who have, including in the USA and Canada. Ford’s Louisville, Kentucky assembly plant, where the Escape and Lincoln Corsair are built, has taken a break from production this month. Toluca, Mexico, where the Jeep Compass is assembled, and Brampton, Ontario, where the Chrysler 300 and Dodge Charger and Challenger are built, were both halted by FCA.
Toyota has had to reduce production of the Texas-built Tundra due to a shortage of semiconductors. However, Subaru declined to specify which models were impacted by the shortage of semiconductors and only said it has “modified” production in Japan at its Gunma plant and in Indiana at its Lafayette plant, which is where the Ascent, Legacy, Outback, and Impreza are put together in the United States.
VW said in a press release that it “needs to adapt production at its various Chinese, North American, and European locations to the current supply situation in the first quarter of 2021.” Volkswagen said that Volkswagen Passenger Cars, Volkswagen Commercial Vehicles, koda, Seat, and, to a limited extent, Audi are affected by this recall.” A VW spokesperson denied that this is the case in North America, despite media reports to the contrary.
According to Kristin Dziczek, VP of research at the Center for Automotive Research, changes in production could affect the availability of vehicles on dealer lots. In spite of this, Dziczek noted, “Automakers are prioritizing the chips they have for the high-demand vehicles.”
Even companies like Honda, Mercedes-Benz, and Nissan, which did not have to reduce production in North America, have done so elsewhere. Representatives from nearly all the automakers contacted emphasized the fact that the semiconductor shortage is constantly changing. Some spokespeople are reluctant to go into detail because production pauses are often short-lived and introduced abruptly.
According to Gartner analyst Gupta, the semiconductor shortage was caused by a combination of macroeconomic and political factors. Demand for automobiles decreased in the spring. Microchip orders were slashed as a result. Demand for consumer electronics such as the PlayStation 5 and Xbox Series X, as well as laptops and desktops for home offices, grew at the same time. Car demand has rebounded much faster than expected, and microchip suppliers have not been able to keep up.
“With lead times of six to nine months, the semiconductor industry has not been able to scale up fast enough to meet this unexpected growth in automotive demand.” Auto supplier Continental said
Continental’s production is expected to be severely disrupted until at least 2021 as a result of the bottlenecks in the semiconductor industry.
Are these microchip shortages caused by the US-China trade war?
As a result of the Trump administration’s actions in the US-China trade war and imposing costly tariffs on Chinese semiconductor imports, there are less semiconductors in the market, Gupta explained. Finally, automotive chip makers like NXP Semiconductors and Infineon are unable to produce the eight-inch wafer microchips that the auto industry relies on quickly enough due to manufacturing constraints.
Will car prices go down in 2023?
While new-vehicle inventories have rebounded, they are still lower than they were at the same point last year, despite the industry’s desire to see inventory levels rise. Production of vehicles with high inventories is being reduced by automakers. Still, the Toyota Tundra, which has had production slashed, has a 30-day supply, according to Cox Automotive.
The full impact of this semiconductor shortage may not be fully understood until it is over, like the supply challenges faced by the automotive industry in the second quarter of 2020. With regard to dealer inventories, and thus consumers, this is also true.
However, one thing is for certain: the pandemic’s effects and challenges on the auto industry are far from over.
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