A global computer chip shortage blamed on a variety of factors has hit the auto industry hard. AutoForecast Solutions, a Pittsburgh-based firm that studies car assembly plants, estimates that 230,000 cars won’t be built this year in North America. That figure could ratchet up higher if the shortage extends further into 2021.
That lost production is likely to translate into fewer new cars in dealership inventories. This comes at a difficult time since demand has climbed considerably following shutdowns during the coronavirus pandemic. Cox Automotive, parent of Autotrader, reports that new car inventories in dealers are at their lowest point in more than six months, back when demand was softer and automakers were forced to pause production due to pandemic restrictions.
Days’ supply — an auto industry term that calculates the theoretical number of days it would take dealers to run out of cars entirely — is down to 59 days. Automakers and dealers generally look for that figure to be close to 50 percent higher for popular models.
Fewer Vehicles and Incentives
Less inventory spells fewer discounts on new cars, which historically elevates used car values as well.
Production cuts have hit some of the most popular vehicles the hardest, though all major automakers are feeling the effects in one way or another. Ford said this week that it will idle plants in Kentucky and Michigan for two weeks to keep pace with limited chip supply. Those plants build the automaker’s popular F-150 pickup truck. General Motors, Nissan, and Honda have announced similar rollbacks as well.
Brian Moody, Executive Editor with Autotrader, says “Microchips are in virtually every aspect of a modern automobile. Today’s car is a computer on four wheels, and that goes for both gasoline and electric-powered cars. Add to that the increasing connectivity of everything from washers and dryers to Wi-Fi-enabled refrigerators, and the shortage may limit some specific new car choices. There are plenty of cars and trucks for sale but you might have to rethink some of those high-tech options unless your dealer already has that vehicle in stock.”
Automakers spoke with the Biden administration last week in an effort to bring more chip production to the U/S. Find a car for sale
