Advertisement: Automotive Microchip Shortage Update – 2022 & Beyond
The global microchip shortage has been plaguing the new car industry for two years now. Car prices have been affected and supply issues have caused ripples in not only the auto industry, but the computing industry too. Many companies remain lucrative, where some are reporting lost revenue. Like Carvana, for instance. Reporting a net loss of $506 Million Dollars.
It’s no wonder car buyers are reluctant to purchase a new car – despite consumer demand exceeding the auto supply chain. And though prices remain at their all time high, it’s unlikely we’ll see immediate relief in the third quarter.
When will we see supply chain relief?
Unbeknownst to most, new cars are becoming more available as the year progresses. Though it’s not the same amount of inventory as pre-microchip shortage. However, it’s growing steadily, making it easier for consumers to find the model they want at their new car dealer.
The chip shortage itself is easing. Qualcomm CEO Cristiano Amon says “Where we are right now: We still have more demand than supply, but we’re starting to see in the second half of 2022, a more balanced equation. I think as we enter 2023, we’re going to get out of the crisis,”.
To summarize, we’re beginning to see the market shift in the right direction. So long as inflation doesn’t cause more supply chain woes, the chip shortage should be well behind us in the near future.
Will Fuel Prices Affect Manufacturing Output?
Bit off-topic. However, many are questioning whether we’re going to see supply disruptions due to the ever-increasing cost of fuel. And the answer is quite satisfying and short.
No, you’re probably not going to see it affect the overall output of new vehicles. Though, we’re going to be paying a premium on vehicles because of it.
Just for reference, the manufacturing of America’s most popular vehicle (Ford F150) takes at least 300 (estimated) gallons of Gasoline in its complete production. Now multiply that number by your average gasoline price and you’ll begin to understand why prices are as inflated as they are, and why these unreasonable prices are here to stay. (At least for now)
Will the end of the Chip Shortage affect Car Prices?
Unfortunately, no. Inflation can be seen everywhere. From the housing market all the way to gas prices. The harsh reality is, prices are not correlated to supply & demand (as most dealers would suggest). They’re caused by overall market inflation! So until there’s some sort of correction to the US economy, it’s likely vehicle pricing in the US will stay the same, even if the semiconductor industry provides enough chips to meet demand.
Which Semiconductor companies are helping the Global microchip shortage?
Though every vehicle manufacturer has improved their arguably slow production of new vehicles, car lots continue to remain empty. So what are the semiconductor manufacturers doing to relieve inventory issues, or improve the supply of chips?
#1 Infineon Technologies AG (Germany)
“I assume that we will be able to cover demand well in 2023,” said Peter Schiefer, the head of Infineon’s automotive unit.
#2 NXP Semiconductors N.V (The Netherlands)
CEO Kurt Sievers said NXP, the world’s second-largest supplier of chips to the auto industry, would run its front-end fabs “full out” this year!
#3 Renesas Electronics Corp. (Japan)
Renesas Electronics, the third biggest manufacturer of semiconductors for cars, has already resumed its full output of semiconductors (March, 23rd, 2022).
#4 Texas Instruments, Inc. (U.S.)
Plans to help address the shortage by investing $3.5 billion annually through 2025.
#5 STMicroelectronics N.V. (Switzerland)
In ST’s fourth quarter earnings call, the company is projected to spend between $3.4 billion and $3.6 billion in capital in 2022, up from $1.8 billion last year. Which will dramatically increase output for 2022.
When are New Vehicles coming back to a Dealer near me?
This itself is a loaded question, as there’s many variables affecting the supply chain. If you have a car, you understand how important it is to stay on the road. Cars are among the best forms of transportation, so keeping Americans on the road should be a priority, right?
According to data, even if cars weren’t priced as high as they are now, and chips wouldn’t be so scarce, subprime auto loans would be at their all time high. Meaning, people cannot afford to be in the cars that they’re in. Dealers are having to get creative with their auto leads as well, using vendors that are uniquely adapting to these times. Whether that’s helping dealers find inventory, instead of selling more units. or perhaps using advertising that could be considered taboo in some dealer groups.
That said, there is an answer to this question.
Though, it may not be what you want to hear.
New Vehicles will be coming back by the end of 2022. However, they may not have the features you want, and if inflation continues to rise, may even be well out of your price range.
Even if chips weren’t in shortage, high prices would likely force prospective buyers out. Due to the ever-growing and TRUTHFULLY unreasonable prices the retail side of the business demands due to economic uncertainty.
Conclusion:
If you’re desperate for a vehicle, it would be best to hold off on purchasing Brand New. It’s not going to have the features you’d expect, and you’re likely to pay well beyond the realm of what it’s realistically worth in this market. If you need a car quickly, it’s best to stick to the used segment. There’s plenty of deals to be had if you look hard enough, and are willing to compromise on the brand, year, and mileage.
Or simply WAIT! There’s no better time to buy a car than when the bubble pops, and retail values go far below what dealers would traditionally pay at auction.
