Need to buy or repair a car? Good luck, thanks to the continued shortage of chips, vehicle production is declining.
Drivers who want a new car are frustrated, and it isn’t going to improve anytime soon, according to industry analysts and automakers.
Indeed, it could very well get worse, analysts said.
Many automakers are expected to release their third quarter sales reports on Friday, and experts expect bad news. They forecast new vehicle sales to be down 13-14% in the past three months, with September sales expected to drop 26%, they said.
This is all due to a shortage of semiconductor chips that has caused automakers to stop production sporadically because they lack the parts needed to deploy new vehicles, some of which use up to 5,000 chips each. The shortage means fewer cars on the lots, with low inventory translating into higher prices for consumers.
The problem extends further. Used car prices have increased with demand, and people who need to repair their current cars are increasingly finding that their mechanics cannot always get the parts they need. When they do, there are often delays of several weeks.
When the pandemic hit and the world entered a recession, most automakers pulled their chip orders because they expected the financial gloom to last a long time, said Michelle Krebs, executive analyst for Autotrader. .
But it didn’t last long.
Just as automakers tried to lure buyers with attractive incentives such as 0% financing for 60 months, demand for personal vehicles came back in force, in part because people wanted to avoid public transport. .
The automakers weren’t ready.
“They went back to their chipmakers and said, ‘We want these orders,’ but they were competing with laptops, phones, video games – chipmakers make more money on those orders.” , Krebs said. âThere was no capacity for automatic chips. This prompted automakers to cut back on production which reduced their inventory and we are now in the middle. “
The current climate of low supply and high demand is changing the way people buy cars, according to a recent study by Kelly Blue Book.
He found that nearly half of car buyers are likely to postpone their purchase due to the chip shortage, with most planning to wait at least several months.
For those who want to buy now, more than a third said they were willing to pay a premium of up to 13%, or about $ 5,600, over regular prices, the study found.
Consumers are also willing to travel further to find the car they want, with around 80% willing to travel between 50 and 200 miles on their new wheels.
He also revealed that among buyers who do not delay their purchase, 25% said they would consider changing brands, 19% said they would consider changing vehicle class and 18% said they would would consider switching from a new purchase to a used purchase.
But, Krebs said, used cars are also in high demand.
âBecause when you don’t have new cars to sell, people can’t really bring in their trade. Or if they have a lease, many extend their lease until there is more choice, âshe said.
âAlso last year, when the travel industry was wiped out by the pandemic, car rental companies sold their vehicles, and there is now demand,â Krebs said. âCar rental companies buy used cars. With high demand and low supply, that means higher prices.
There are other supply issues, she said.
âThe chips are the center of attention and they’re the biggest problem, but the wipers and the steel and the plastic resin, all of those things that go into making parts, we know the suppliers are as well. really rushed by this, âshe said.
And, she said, many of the parts needed for electrical components in vehicles are made in countries like Malaysia and Vietnam.
âThese countries are experiencing terrible outbreaks of COVID and they have no vaccines available,â she said. “They have to close factories there frequently because of illness and even death.”
This is causing some industry executives to demand more chip production in the United States.
So the big question: how long will this last?
Krebs said it was difficult to know, noting that automakers such as Hyundai, Toyota and GM “sometimes don’t know from day to day or week to week how many chips they will get.”
âWe hear it will continue until next year, maybe not so bad. It’s going to take some time to normalize, âshe said.
Toyota, for example, is now “in the thick of it,” Krebs said. The company said it is cutting global production by 40% for September and October.
Ford’s chief executive said earlier this week that he expects the shortage to continue until 2022.
But if you’re patient and willing to do a lot of research – and probably travel – there are cars to be had, Krebs said.
âYou won’t have a lot of choice. If you cared about an SUV, you might need to get a sedan or hatchback, âshe said, noting that brand availability varies by region. âYou have to keep working and keep expectations low. “
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Karin Price Mueller can be contacted at [email protected].