By now, at some point, you’ve had some experience with supply chain shortage. Unless you’ve been living under a rock, empty aisles and product deprivation is becoming the “new” normal.
What if I told you the biggest issue with the supply chain plaguing the country, if not the world, is not even on the average American’s awareness level? What if I told you it’s the most important issue that needs to be solved?
Welcome to the car industry’s conundrum. The laundry list of supply shortages for the auto world so astronomical – it’s in dire need of your attention and inevitably will leave you shocked.
Where to begin with this hot-button issue? Incredibly low inventory for semi-conductor chips, also known as computer chips for the non-tech savvy, are heavily in demand. Auto parts scarcities seem to be rampant nationally, which are undeniably overwhelming auto repair and auto body shops. Shipment delays are becoming a punch line for jaded semi-truck and fleet drivers. Used vehicles with high mileage are priced the same as pre-pandemic luxury vehicles. And finally, new car sales are as common as the timeframe when you should change your toothbrush—every 3 months.
Unless you really stop and pay attention, the downward spiral of the supply chain for the auto industry will eventually catch up to you. You think you’re okay now, but what about the future? What if you’re already up the creek without a paddle?
Here’s everything you need to know about the supply chain and how it’s affecting transportation.
Supply Chain Issues in General
Omicron and worker shortages are the leading cause for current supply chain issues. The first global outbreak of COVID-19 created a downward spiral that’s been yo-yoing back and forth for roughly more than 2 years. The different variants of the disease have not helped businesses retain employees or with the economic progression of the country. In fact, inflation is prevalent. Prices have skyrocketed for most, if not all products. From the simplest of things, such as deodorant, to your favorite restaurant’s menu prices.
According to U.S. News & World Report, menus were changed so that New Year’s Eve saw no lobster – at $40 a pound, it was deemed too expensive to put on the menu.
The price of oil has also increased causing gasoline rates to go up. Some critics have stated the country is no longer energy independent, which has increased the problem further, making Americans pay more at the pump.
The national average for regular fuel at the end of 2019 was $2.60 per gallon and is now a whopping $3.34 per gallon.
The Importance of Semi-Conductor Chips
Semiconductor chips are tiny and highly complex. They contain billions of transistors and those transistors form the basis of the circuitry that allows machines to do their job.
Due to their complexities, making chips is a difficult process. Manufacturers need huge facilities with dust-free rooms and costly equipment. The average time it takes to make chips is approximately four months, according to ASML, the world’s leading semiconductor supplier.
According to Bloomberg, chips power a wide range of products, from washing machines to advanced satellites. Cars, of course, use semiconductors. A vehicle’s touchscreen is essentially a computer, and that’s one area where chips play a vital role.
The newest report from the US Department of Commerce says in 2019, manufacturers had, on average, a 40-day supply of chips. Today, they have a five-day supply.
The Importance of Silicon
Additionally, chips contain an ample amount of silicon. Silicon is a fundamental material used to build mobile phones and computers, as well as glass, concrete and car parts. The end goal is to transform wafers of silicon—an element extracted from plain sand—into the network of billions of tiny transistors that will eventually give machines their crucial capabilities, according to Bloomberg. But how can there be a shortage of silicon if it’s made with something as simple as sand, you may ask? Last year, and specifically towards the last quarter of 2021, companies were in trouble with the massive slowdown of silicon production due to a variety of factors, including increased demand since the pandemic (which was brought on by halts or decreases in operations), heavy labor shortages throughout the world, and deep delays in overseas shipments, which have resulted in the global supply chain crisis. All of these factors have directly contributed to rising costs making it abundantly clear as to why silicon is much more expensive than pre-pandemic days.
Buying a New Car
If you haven’t experienced trying to buy a new car since the pandemic, consider yourself lucky. The nightmare that awaits you, especially now, is something out of an apocalyptic movie.
Your experience will be met with zero to only a few cars on lots, and if you’re fortunate enough to find a vehicle for purchase, plan on spending additional fees tacked on by dealerships. Some dealerships are stapling on an extra $2,000 just for being low on inventory. You read that right. Consumers are being penalized for something completely out of their hands and some dealerships are taking advantage.
The most important detail to know is get ready to pay steep prices, once you actually get hold of a car. According to Car & Driver, Kelley Blue Book has calculated that the average price of a new car in the U.S. in December 2021 was $47,077. That’s up from $46,329 in November, just a month before. If you want to go back further in time, that’s up from the $40,000 threshold in the summer of 2021.
Plan on spending more than $3,700 above the manufacturer’s suggested retail price for a Kia Telluride SUV or anywhere from $3,000-$6,000 above MSRP for luxury vehicles, such as the Range Rover or the Cadillac Escalade ESV.
If you manage to deal with all things considered and regardless of the above circumstances, it’s likely that your newly purchased vehicle will not be exactly what you envisioned. You’re also facing limited options with exterior and interior colors, the trim of the vehicle, and any other bells and whistles you want to add. In other words, you’ll be paying a hefty price for a car that you may not be that into or even like.
Conclusion
Be patient. Find other viable solutions like Carfixt to help you. Either hold on to the current vehicle you have and try to get it fixed, or look for reasonably priced used cars from private sellers. Recovery for microchips will come slowly and experts are saying that the car industry will have to go through this at least another 6 months before seeing improvement. Hyundai Executive Vice president Seo Gang Hyun told investors in early January that “The normalization of auto chip supply and demand is expected in the third quarter when the capacity of semiconductor companies is expected to rise,” according to KBB. Don’t get discouraged. Remember that nothing lasts forever.
