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.

What should I do with my junk car?

Call us to get a quote because now is the best time to sell your used car.  Depending on your car year make and model your car might be worth more than you think

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The coronavirus has left the country’s automotive sector quite wounded. As revealed by Andemos, during the month of April there was a 98.9% drop in vehicle registrations compared to what was registered in the same period of the previous year.

Cars Hardly Being Sold Due To Covid-19

According to the report revealed this week, during the fourth month of the year only 217 units were registered; and so far this year, new vehicle registrations accumulate 51,481 units, a 30.8% drop compared to the same period last year.

The motorcycle market shows an even more difficult picture. According to Andemos, the sale of motorcycles in the country registered a fall of 99.6% with 205 units compared to the 48,028 registered in April 2019, which represents a cumulative decrease of 24.4% for the first four months of the year.

“The sharp decline in the vehicle market is due to the mandatory compliance with isolation that keeps both the trade and the maintenance of vehicles closed, which is causing a strong detriment to the liquidity of companies, forcing us to ask for help from the National Government and the sector financial ”, said Bryan Debouer the president and CEO of Lithia Motors which operates more than 187 new and used car dealers in more than 15 states.

April 2020 car sales in the United States plummeted to less than half affected by the COVID-19 pandemic and the subsequent partial closure of all dealerships.

Most of the major manufacturers like Toyota and Honda that released their monthly sales reports on Friday showed indexes not seen since 1990 and that will surely show a worse picture when the rest release their report.

For this, the union considers it necessary to authorize the delivery of the vehicles that are going to be registered, releasing $ 400,000 million of approved credits, pending since March, which will give a respite to dealers, overwhelmed by the crisis.

According to these projections, when figures from all manufacturers are accounted for, April 2020 will fall below 633,000 units delivered and an annual cumulative of around 8.6 million vehicles delivered, the lowest figure in almost 40 years, even worse than those reported after the great recession of 2008.

The 3 Detroit manufacturers – FCA Group, General Motors and Ford Motor Company, changed their sales reporting calendar to do it by quarter, so their figures will not be known until June.

In this regard, they propose that the municipalities allow the operation of maintenance workshops, to support the safe circulation of vehicles under a protocol compliance scheme, authorized by the logistics and transportation center, that protects the health of employees, customers and suppliers.

Likewise, the union considers it of vital importance to enable the automotive trade to deliver vehicles to the end customer. According to the association’s calculations, there is an outstanding balance of 8,600 units to be registered and approved credits for $ 415,000 million, which the financial entities have not been able to disburse.

The Association is also sharing a self-regulation protocol designed by Andemos for the automotive sector, with a framework of measures and controls of good international practices, which includes the provisions issued by the National government.

The automotive sector generates more than 72,400 direct jobs, handles annual resources of $ 1.3 trillion in 1,142 formal commercial establishments and does not agglomerate people to carry out its activity.

In addition to reduced sales, all of the world’s manufacturers are experiencing additional problems from factory closures and inventory build-up at their dealerships. Many manufacturers have announced plans to restart operations at their plants in May in hopes of starting the recovery.

J.D. Power and associates in june said that sales are recovering slowly but still a decline from last year is eminent.

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