Is Decreased Semiconductor Chip Demand a Win for Consumers?
Since the pandemic disrupted global supply chains, shopping for new cars has been difficult. The dreaded semiconductor chip shortage resulted in limited production of new vehicles, which sent prices soaring for both new and used cars. Finally, though, it looks like the semiconductor woes may be coming to an end, and this could be great for consumers.
How the semiconductor chip shortage affected vehicle production
The semiconductor chip shortage has been a problem for the automotive industry since the pandemic’s early days in 2020. All new cars include computer chips, so when manufacturers were unable to access adequate numbers of chips, they were unable to produce enough new cars to keep up with demand.
This new car shortage resulted in delayed vehicle orders and sometimes even empty car dealerships. Because consumers could not purchase new cars, the demand for used cars drastically increased, and used car prices increased.
As time passed, some pandemic restrictions settled down, and people returned to work. However, the chip shortage continued to impact automotive production. According to Consumer Reports, manufacturers were not close to producing as many vehicles in 2021 as they did in 2019, the year before the chip shortage began.
The chip shortage may be cooling down
Three years since the start of the pandemic, there may finally be good news regarding the semiconductor shortage. According to Yahoo Finance, companies are having an easier time acquiring computer chips, and in fact, there may be a higher supply of chips than there is a demand. This would mark a significant change from how things have been for nearly three years.
Auto manufacturers are already showing how this increase in chips affects production. Toyota plans to increase production to 10.6 million vehicles this year, which is even more vehicles than the company made in the year before the pandemic. Toyota isn’t the only company that is showing signs of increasing production, either.
Even though the increase in semiconductor supplies is a promising sign for vehicle production, it does not mean that everything is returning to normal in the world economy. In fact, Yahoo Finance also highlights how a slowing economy has resulted in a decrease in demand for computer chips. This has resulted in an increased supply.
Consumers may benefit from increased vehicle production
With the chip shortage seemingly settling down, consumers might finally see some relief. One major way that increased production could help consumers is through reduced wait times for new cars. As auto production has been slow, consumers who have ordered new vehicles have often had to wait significant periods for their cars to be delivered.
For consumers interested in used cars, this could also prove to be great news. As previously stated, the demand for used cars has skyrocketed as new car production has been limited. This has led to historically high used car prices, which has been difficult, as consumers often shop for used cars to save money. With an increased supply of new cars, the used car market might finally stabilize, and used car prices might fall.
There are also signs that new car prices could steady out as well, as the Yahoo Finance article highlights. In the United Kingdom, Tesla recently announced major price cuts on its electric vehicles. This is putting some of its cars like the Model 3 in more affordable price ranges.
There is no indication yet that other manufacturers will implement similar price cuts or that Tesla itself will cut prices in other countries. However, this does still highlight how new car prices could finally be on the decline after years of unprecedented increases.