Banner Vehicles July 2019

Shortage of New and Second-hand Vehicles

Around the world the entire auto manufacturing industry has been limping along for months due to a worldwide shortage of semi-conductor chips.

Empty ShowroomThis has prevented manufacturers from producing enough new vehicles to meet the demand from buyers especially in the USA; buyers that are eager to spend their pandemic savings and stimulus cash. As a result, many vehicle dealerships are practically devoid of stock, and vehicles are fetching record prices.

Even the second-hand price for a good used vehicle has also taken off. The market in America has been reported to have jumped by a record-breaking 10.5% in June, after rising over 7% in May and 10% in April this year.

Used Honda CivicWe can’t see any figures for July or August. There was no difference in the increases between a flash optioned Ford F-150 or a plain used Honda Civic, the market has been brutal for everybody.

How long will American car buyers be stuck with these shortages and crazy new and used prices? The talk is that buyers will have to wait until 2022 for the auto industry to settle down and return to normal if it ever does.

Some of the pain, especially in the used car market, could begin to ease up earlier. But it could be well into late 2022 or 2023 before prices fall back to earth and customers see the sort of selection they’re used to in American showrooms.

It’s been reported that it will take more time before those chips make their way into vehicles and those vehicles make their way to the showroom. The automotive sector’s current troubles date back to the start of the Covid-19 crisis, when car manufacturers shut down their factories and cancelled orders from their suppliers, including chip-makers, in the face of lockdowns and stay at home orders.

Semiconductor ShortageInstead of waiting around for Ford, GM, and the rest to restart production, semi-conductor companies simply went and found new customers, selling their product to smartphone and other electronic companies whose business was suddenly booming thanks to Covid-19.

The auto companies turned their assembly lines back on, only to discover that there were not enough chips on the shelf. The shortage stopped their ability to make cars, as vehicles are heavily computerised needing thousands of chips.

The auto industry is a relatively small customer for the semi-conductor-makers, so they effectively lost their seat at the table. The industry’s chip famine has forced automakers to slow down or stop plants affecting production in 2021.

Intel, the world’s biggest semi-conductor company, say that it will take about two years for the industry to construct more chip factories to meet the automotive demand. There are other plans to find more effective new ways to develop chips more quickly, though it’s unclear whether or when those efforts will pay off.

October 2021

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