What is the impact of the global chip shortage on the average American driver?
Coupled with the waning pandemic, the microchip shortage has affected the auto industry in major ways. American drivers looking to buy or preorder a new car will be the most impacted as the U.S. must heavily rely on foreign countries (China, Taiwan, Thailand) for the chips. With lower inventory of new cars and prices increasing on both new and pre-owned cars, the value of your trade-in should also increase.
“Last month, Ford Motor Co. warned the chip shortage might slash its second-quarter production by half, costing it about $2.5 billion and about 1.1 million units of lost production in 2021, while General Motors has extended production halts at several North American factories because of the shortage,” according to Automotive News.
Over the past 30 years, the U.S. held a 37 % share of semiconductors and microelectronics production (in 1990) and today just 12 percent of semiconductors are manufactured in the U.S. A lot of hype was made on May 18th as President Joe Biden visited a Ford plant in Michigan to highlight the new F-150 Lightning, the electrified version of the popular truck. Yet, Ford chief financial officer John Lawler, quoted by Automotive News, said the company has some 22,000 partly built vehicles with missing parts. That list is already known to include the popular F-150. The chip shortage has gained the attention of the federal government. One U.S. senator has proposed $54 billion to increase semiconductor chip manufacturing here in America over the next five years.
The consulting firm AlixPartners, cited by the Washington Post, estimated that the global auto industry will make somewhere between 1.5 million and five million fewer vehicles this year than originally expected. The shortage is expected to last through 2022 or 2023.
What does the computer chip actually do?
This micro-tiny chip has an enormous responsibility to your two-ton car’s favorite functions and features including your radio, heating and cooling seats, touch computer screen, navigation, and much more. It is important to note that many industries such as healthcare, technology, energy, and communications — to name just a few — rely on microchips to power cellular phones, smart TVs, laptop computers, transportation and logistics systems, and hospital equipment, like ventilators.
Which vehicle brands are most affected?
If you are in the market for any of the following cars, trucks, and SUVs, you can expect to wait longer and pay more for due to manufacturer factory halts or slowdowns:
- Ford F-150, Bronco Sport, Explorer, Mustang
- Lincoln Aviator, Nautilus
- Jeep Grand Cherokee
- Mercedes-Benz C-Class, GLC, EQC
- Audi Q7/Q8
- Porsche Cayenne
- Volkswagen Touareg
- Chevrolet Camaro, Equinox, Malibu, Traverse
- Cadillac XT4/XT5/XT6
- GMC Acadia
- Hyundai Sonata
- Jaguar XE, XF, F-Type
- Land Rover Discovery
- Range Rover Evoque
- Mini Cooper
- BMW X1, X2
- Mitsubishi (*will cut monthly production from 90,000 by 16,000 but models were not listed at time of this post)
- Nissan Altima, Leaf, Maxima, Murano, Rogue
- Subaru Ascent, Impreza, Legacy, Outback
- Dodge Durango
The average new vehicle sales price tops $40,000, up nearly 10% in two years. As consumer demand exceeds supply in both the new and used car markets, the pre-owned vehicle market also reported a 10% increase in prices, the sharpest increase in more than a decade.
Additionally, driving up prices is that some manufacturers are halting production of certain models to divert the coveted computer chips to higher profit vehicles like pickup trucks and SUVs. One example, reported by Cox Automotive, is the Chevrolet Silverado pickup which is now starting at just under $51,000.
The Associated Press reports, “The vehicle scarcity and the soaring prices can be traced to the eruption of the coronavirus 14 months ago. As the virus spread, auto factories shut down for a couple of months. With millions more people working from home, demand for laptops and monitors led semiconductor makers to shift from autos to personal electronics. Soon, though, a faster-than-expected economic rebound boosted demand for vehicles, and auto plants tried to restore full-scale production. Yet chip makers couldn’t respond swiftly enough.”
Lastly, experts say the pandemic and chip shortage have made rental cars scarcer too, increasing prices and longer waits for reservations as Americans begin to travel again. Some rental car companies have resorted to the used car market to find vehicles for their consumers.
How can Cassels Garage’s superior full-service auto repair and maintenance center help you through these current challenges?
Here are three immediate ways:
- If you cannot get a rental car for your summer vacation, take your own; but only after you have our ASE certified technicians check and service your vehicle for trip readiness.
- If you are struggling to find a pre-owned vehicle that meets your needs and expectations, contact our car concierge professionals who have access to all the same auto auctions as the mega-dealers but with far more personalized service.
- Drive your tried-and-true classic a little longer with regular service and preventative maintenance until the inflated new and used car market prices level out.
For a free quote on all auto repair services and the car concierge program, contact Cassels Garage of Melbourne, FL today. We will have you well on your way hassle-free, affordably, and reliably.