The global auto parts shortage, particularly for semiconductor chips, has led to production delays for more than 1 million vehicles. American automakers have been hit hardest, such as Ford having to delay manufacturing on over 100,000 F-series trucks.
The shortage has forced the industry to adapt in several ways. Let’s take a look at what they’ve done over the past year and a half.
How the Global Chip Shortage Impacted the Auto Industry
When the COVID-19 pandemic hit in early 2020, chip suppliers closed their factories to keep their workers safe. This resulted in a shortage of the chips needed for many of the products we use every day, including cars and trucks.
A typical new vehicle contains over 100 computer chips that control everything from the entertainment system to engine timing. When the chip suppliers shut down, it meant the car manufacturers couldn’t get the chips they needed to build new vehicles.
What Caused the Chip Shortage?
Chip suppliers shutting down manufacturing due to the COVID pandemic was the biggest contributor to the parts shortage. Other factors combined to make it a perfect storm, however.
The pandemic led to many people working from home, which meant a lot of them needed to buy new computers, cell phones, and other technology. The demand for those products used up most of the chip inventory that was available when the factories closed.
How Automakers Are Adapting to the Shortage
Many large automakers, such as Ford and GM, have had to schedule factory downtime on their production lines. Toyota is one of the hardest hit, with a 40 percent cut in global production.
As a result, there’s a shortage of cars available to ship to dealers and there are large numbers of unfinished vehicles waiting for chips to arrive at the factories.
How the Shortage Impacts Consumers
While car manufacturers suffer from a lack of inventory, there are several impacts to the car-buying public as well.
Higher Prices
The most significant impact is higher auto prices. Many dealers have little inventory on their lots and low supply of vehicles with high demand results in higher prices.
The average price paid for new cars in July 2021 was over $42,000. These kinds of prices set record highs for the industry.
Higher Demand for Used Cars
Between the high cost of new cars and the shortage of inventory, many buyers are turning to the used car market. This means there are fewer used cars available and the prices of the ones that are also spiked.
Even used cars sell for a premium, with the average price in July 2021 hitting more than $25,000.
While these issues are bad news for the new car industry, it has helped the aftermarket parts industry. Companies like redlineautoparts.com that provide parts for the used car market are seeing a lot of new business.
Price Gouging
While it’s related to high prices, another side-effect of the auto chip shortage is price gouging by some dealers. People who ordered new cars at the manufacturer’s list price have found themselves faced with thousands of dollars in unexpected expenses when their vehicle arrives.
These shady dealers know there’s plenty of demand so someone else will buy the vehicle if the intended buyer backs out.
When Will the Auto Parts Shortage Improve?
With the pandemic still affecting much of the world, it’s hard to predict exactly when the auto parts shortage will improve. Most experts think the pressure will ease sometime in 2023, allowing the market to return to normal.
Be sure to check out the Auto section of our blog for more articles about the automotive industry.
