Car buying has become a bit of a headache during the past year. It’s harder to find a good deal on the dealership lot between low inventory and increasing prices. The chip shortage is the leading cause, but is there an end in sight? It looks like it might be slacking off for a bit at least.
Why is there a chip shortage?
Coronavirus (COVID-19) played a considerable part in the chip shortage that sent car prices soaring in the new and used market. With people getting sick and companies closing for mandated lockdowns, production of these parts has slowed down significantly.
There aren’t enough chips to go around. However, it isn’t just the automotive market suffering. A lot of technological devices we use today need these chips. Some companies are working overtime to meet the demand for them, but it’s been tough to do with coronavirus still hanging around.
Also, other components are making up these semiconductor chips that are seeing shortages. Parts like silicon take quite a bit of time to produce and refine before being sent to create the semiconductor chips needed.
Automakers have been worried that chip supply wouldn’t get back to normal for at least another year. If that ends up being the case, prices for vehicles could remain high for a while yet. Some companies have resorted to putting the big selling vehicles first, and the less popular ones will sit on the sidelines until more chips can be obtained. This has made buying a car difficult, especially when you want a specific model that may not be available yet.
There’s some good news for those that are car shopping
Despite the chip shortage we’ve been experiencing for the last year, light is starting to materialize at the end of the tunnel. According to Auto Evolution, at least five chip-producing companies have announced that their chip supply has steadily increased in the last two months.
Automakers have been sidelining production on some vehicles or sending them out without specific best-selling features, like infotainment touchscreens or heated seats. Others have prioritized the “made to order” business and used their existing chip stock for the already purchased vehicles.
Texas Instruments, NXP Semiconductors, Renesas Electronics, STMicroelectronics, and Infineon have increased their production lines to meet needs. The increased supply could mean the shortage fog is lifting, or will it?
Will car buying recover soon?
Increasing chip shortage is definitely good news for the auto industry, but it doesn’t mean that normal car buying will return and everything will go back to the way it was. It’s good news for the demand right now, though.
Experts expect that a new wave of the chip shortage will return, possibly at the beginning of the 2022 car buying season. Some automakers have stopped production of their more popular vehicles, so these could return with a new stock of chips, but then you have the new models that will need them as well.
While there’s some good news regarding the chip shortage that we’ve been dealing with for over a year, it doesn’t mean we’re out of the woods yet. Once the coronavirus is under control and companies can get ahead of the chip game, then we’ll start seeing the automotive industry return to normal.