The ebb and flow of new-car inventories over the last year has a new challenge: a global computer chip shortage thanks both to a global trade war affecting Chinese tech plants and increased demand for computers and video games. New cars contain myriad chips that operate everything from simple electrical components such as power door locks to big infotainment touchscreens, and most of those parts are sourced from China.
Most major automakers including Ford, General Motors, Toyota, and Nissan have now said they are planning to cut production at assembly plants because they can’t get chips needed to assemble their cars.
Chip shortage could impact incentives
Production cuts won’t be felt immediately in showrooms, but they will result in fewer cars arriving at dealers as the year progresses. Automakers tend to lessen their use of incentives including rebates and special financing when inventories are lower, which may result in fewer deals, too.
The shortage comes at a challenging time for automakers. Sales slumped due to pandemic restrictions as well as a sluggish economy, though they were generally up last month and expectations are high for 2021 as the coronavirus vaccine rollout is expected to boost showroom traffic. Sales were generally up in January for the handful of automakers that post monthly sales results.
