Dealers See Shortage of New Cars Due to Limited Supply of Microchips

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Last year, the auto industry was hit hard by the COVID-19 pandemic. Locked-in orders put factories on the back burner, and for a time dealerships had no customers.

Now there are a lot of interested buyers, but a shortage of vehicles due to a shortage of the smallest of the parts: the microchip.

“There is a strong demand for new vehicles right now as we come out of this pandemic, but there aren’t enough chips to put in cars,” said Ed Kim, automotive analyst and vice president of ‘Auto Pacific. .

So what happened?

First, the auto industry has slowed down and doesn’t need so many chips. At the same time, sales of consumer electronics have exploded. Laptops for homeworkers and remote students.

There was also an increased demand for things like video game consoles and televisions as people looked to be entertained while staying at home.

This has led to a global shortage of tiny components, and the situation worsened during the first part of 2021.

“It will take some time for chipmakers to really catch up with automotive demand,” Kim noted.

Many auto factories have been idle for weeks at a time due to the inability to build vehicles.

Or in some cases, vehicles have been built and then parked, waiting for electronic components to arrive and then be installed.

The bottom line?

If you are shopping for a car, you might have limited choice and limited bargaining power.

“The supply of new cars is dwindling rapidly, which just means there aren’t as many great deals to be had right now,” Kim said.

So how many microchips does each new car use? Dozens, for all mechanical systems, security systems, things like infotainment and climate controls, and even those increasingly common proximity keys.

One automaker even considered delivering cars to customers with just one key and then sending them additional keys when they had a better supply.

As factories scramble to build cars and dealers scramble to include them in their inventory, things might not get better until the microchip pipeline can start operating at full capacity again.

“Most analysts don’t expect the full chip supply to return for at least several months,” Kim added.

Summer could be tough for automakers, car dealers, and car buyers.

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