CHIP SHORTAGE AND AUTO SUPPLY DISRUPT

2021 has been a quite tough year for the automotive industry. The carmakers suffered from the chip shortage as an effect of Covid-19. Pandemic has its impact on each and every sphere of our life. We need to move around freely but the modern world dictates its new rules.

What is the whole shortage thing about?

It may not seem very evident but it has something to do with semiconductor chips. Ok, let’s make it simple.

microchip with parts of golden color

As Investopedia states that a semiconductor is a material product usually comprised of silicon. It conducts electricity more than an insulator, such as glass, but less than a pure conductor, such as copper or aluminum.

Semiconductor chips are essential components of a modern vehicle.

The pandemic prompted chip factories first to cancel shifts and then to shut down early last year.

Staying at home to be safe makes many people look for entertainment. We started using more gadgets like smartphones, tablets, laptops, etc. And guess what? All of them have semiconductor chips inside.

This unexpected twist affected vehicle manufacturing severely.

What about the carmakers then?

Ford, General Motors, Fiat Chrysler (Stellantis), Volkswagen, and Honda seem to have struggled the most. Interesting fact that some brands like Toyota aren’t suffering that much. It happens probably because Toyota prepared better after 2011. The region learned how sudden it may disrupt supply chains from the massive earthquake and tsunami that hit Japan.

beige color toyota model

Some automakers have done their best and diverted chips from slower-selling models to those in high demand. Among them are models such as pickup trucks and large SUVs. Ford, GM, and Stellantis have started building vehicles without some computers. They put the cars in storage with plans to finish them later.

In some cases, to keep production moving, automakers have been removing some features from their vehicles.

General Motors has temporarily removed stop-start engine technology from its full-size SUVs to conserve chips. It is also removing high-definition radio from some of its Chevrolet Silverado and GMC Sierra pickups.

The majority of the processors are made particularly overseas. Because of the closed borders for some period of time, it made things worse.

As a result, the production and distribution of chips reduced drastically.

When will it return to normal?

IHS Markit estimates that from January through March, the chip shortage reduced North American auto production by about 100,000 vehicles.  According to Phil Amsrud, Senior Principal Analyst – Automotive, IHS Markit the chips shortage will be resolved through 2022-2023. So now we deal with outcomes.

Automakers and the U.S. government are both working hard to eliminate the shortages. Just in June, the U.S. Senate took a step forward to fight the inventory crisis by passing a bill. It states to invest in domestic microchip production, having achieved 60 votes in the affirmative.

Does it affect the prices of new cars?

It’s a tough shopping climate because the market has changed dramatically.

Together with rising consumer demand, this has led to an increase in the prices of new cars.

The perfect deal you got a few years ago won’t be the same today. The dealership may only discount the vehicle by a few hundred dollars, hold the line on the sticker price, or even set a price above MSRP. Dealerships will have little incentive to discount any of their cars as long as demand exceeds supply across the board.

The percentage of buyers paying above sticker price has risen more than 50% year over year — from 8.1% in April 2020 to 12.7% in April 2021. That’s the highest percentage on record since 2002.

Vehicle sales dropped again in June, the second month in a row of declining vehicle sales. And rising prices and shortages keep the potential buyers away.

It can take time to find the vehicle you want in a configuration that you are looking for because of the limited inventory these days. It is also a good idea to have backup picks in colors. As well you may consider a range of different makes and models to give yourself the most flexibility. You could give the market some time to cool down.

But what if you want to drive your car now and be away from all this fuss?

You might want to take advantage of leasing and enjoy the benefits of your new car right now. With leasing, you will get an opportunity to have a brand new vehicle with the latest features. On top, you get a manufacturer’s warranty that will protect you from unexpected problems.

You will get a wide range of choices for almost any make and model you desire to drive. It also is going to cost lower monthly payments. There is no need to worry about market fluctuations and chip shortages as Grand Prix Motors offers the best deals to fit your needs. 

We pride ourselves to deliver a remarkable customer experience in order to make it convenient, transparent, and stress-free. Book a free consultation with your personal lease expert and get all the needed information in no time!

#enjoy your freedom with Grand Prix Motors!

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