{"id":2561,"date":"2022-07-05T18:25:13","date_gmt":"2022-07-05T18:25:13","guid":{"rendered":"https:\/\/dealerindepth.com\/?p=2561"},"modified":"2022-07-05T18:25:13","modified_gmt":"2022-07-05T18:25:13","slug":"chip-shortage-may-continue-into-2023-for-some-automakers","status":"publish","type":"post","link":"https:\/\/dealerindepth.com\/index.php\/2022\/07\/05\/chip-shortage-may-continue-into-2023-for-some-automakers\/","title":{"rendered":"Chip Shortage May Continue Into 2023 for Some Automakers"},"content":{"rendered":"

Used cars could continue to be the right choice for many consumers with the continued shortage of semiconductor chips. This Chip shortage might continue to impact many automakers into 2023, making it a few years with this challenge in the supply chain. We\u2019ve seen some automakers put vehicles together minus the chips, but that has slowed because of a lack of space to store unfinished models. Other automakers are creatively working to offer vehicles with most of the functions, leaving out a few chips and some features during the process.<\/strong><\/em><\/p>\n

It\u2019s Not a Laughing Matter<\/h2>\n

The lack of chips to build new cars has created a serious problem in the car world. Even though we fawn over the new models coming out, it might be some time before several of these high-demand vehicles ever make it to your driveway. Currently, the slow production of the GMC Hummer EV means GM would need 17 years to fill the already-placed orders. While that\u2019s certainly unrealistic, fixing the shortage of semiconductor chips is not an overnight process, which continues to frustrate nearly every automaker and dealer in the country.<\/p>\n

When Will the Supply Finally meet Demand<\/h2>\n

The current supply and projected production of semiconductor chips should put the automotive world at a meeting point in the early part of 2024. That means we\u2019re going to see continued high prices for used cars<\/a><\/strong> and shortages of new models on dealership lots for at least another 18 months. Thankfully, we should start to see the relief of this problem in the third or fourth quarter of this year. When that happens, we might feel like everything is over and the automotive market is back to normal, but don\u2019t get fooled; we won\u2019t see true relief from this challenge until 2024, and that\u2019s if everything goes according to plan.<\/p>\n

Shortages Impact Sales, but Not as Much as You Might Think<\/h2>\n

Overall new vehicle sales in the United States are off about 12% because of the shortage. This is the average, with different automakers reporting various drops. General Motors<\/a><\/strong> currently reports sales are down 20% for the quarter, while Toyota is off 15% compared to projected numbers. Stellaris is down 14%, Nissan is down 30%, Honda reported a 23% decline, and Hyundai is short only 4% during the first quarter of the year. These numbers show that the sales drops aren\u2019t entirely due to the shortage of semiconductor chips but this supply issue is impacting most of the major auto brands.<\/p>\n

How Many Chips Does Each Car Need?<\/h2>\n

With advanced electronics and safety systems included in new vehicles, each vehicle needs more of these chips than ever before. The average mainstream vehicle uses more than 100 chips, while a luxury car with advanced features could have more than 150 of these chips. With the number of new cars produced every year, automakers need hundreds of millions of these chips to get the job done and put new cars on the road.<\/p>\n

Does the Shortage of New Cars Impact the Price of Used Cars?<\/h2>\n

Yes, it does. In fact, the meteoric rise in used car prices is 100% attributed to the shortage of new cars in the market. The pandemic caused panic in the auto industry, and many automakers canceled their orders for semiconductor chips. When this happened and people were ordered to stay home, many people began to order electronic gaming systems. Guess what? These gaming systems use the same chips as cars and trucks, which meant the chips were shipped to these manufacturers and not to automotive production facilities.<\/p>\n

Why Didn\u2019t Automakers Receive Priority After the Pandemic?<\/h3>\n

Producers of semiconductor chips continued to supply these chips to gaming console manufacturers as the pandemic ended. This put automakers behind Microsoft and Sony when it came to supplying the chips to them. It makes sense but has now put the automotive industry in a strange place. Last summer, the supply of new cars was so low that some used models sold for more than they did when they were new. This was a situation in which the demand for vehicles<\/a><\/strong> was much greater than the supply of them, causing this strange industry we have now.<\/p>\n

Dealers See Empty Lots<\/h2>\n

Unfortunately, many new car dealers continue to struggle to make their car lots appear full. Some have moved new vehicles to every other spot in the lot or pushed them all to the front nearest the access street. No matter what they do, they cannot create the full inventory appearance desired. Additionally, many of the vehicles still on the lot are those that customers aren\u2019t looking for, which makes for a seriously frustrating situation. This shortage of new models sends shoppers to the used car lots, but those vehicles are priced higher than expected.<\/p>\n

Can You Hold On Until Things Normalize?<\/h2>\n

If we have a true end to the semiconductor shortage in sight, can you wait that long to buy your next vehicle? Will your current ride last until 2024, when you might find more affordable prices for used cars and a full inventory of new models waiting for you to drive one home? Right now, dealers are doing everything they can to incentivize ordering new models rather than taking from dealer inventory. They\u2019re also offering amazing trade-in deals that could put you behind the wheel of a new model while they take your used car and sell it to the next owner.<\/p>\n

Will We See More Delays in a Normal Auto Industry?<\/h2>\n

The prediction that there will be enough semiconductor chips in 2024 is a prediction of a perfect world. This means no more delays, no issues, and no supply chain problems. Does that sound like something we should expect, considering how the last few years have gone? This prediction might be a bit conservative, and we could see things get back to a semblance of normal before that time, but don\u2019t get your hopes up. The best thing you can do is hang onto your old ride for a bit longer unless your local dealer is offering a deal you just can\u2019t pass on.<\/p>\n