Automotive Chip Shortage Likely To Persist Through 2023

November 28th, 2022 by

While consumers line up to purchase new vehicles, car dealerships offer limited options at high prices because of the shortage of semiconductor chips. This article will explain what caused the chip shortage and help you decide if this is still the right time for you to purchase a new vehicle.

What’s Causing The Chip Shortage?

The shortage of semiconductor chips is due to the COVID-19 pandemic, which simultaneously increased demand for electronics such as cell phones, which the same chips are used in, and forced dealerships and manufacturers to close down. Many automakers canceled parts orders based on the low demand for vehicles during this time and haven’t been able to rebuild their supply. Several countries where the chips are manufactured are still seeing a surge in cases of the Delta variant of COVID-19, worsening the supply shortage.

Right now, some of the largest manufacturers of semiconductor chips make most of their money from personal electronics. Bill Jewell, the Semiconductor Intelligence President, notes that TSMC, the dominant wafer foundry, only makes 5% of its revenue from the auto industry, compared to 38% coming from smartphones alone. This makes the auto industry a lower priority.

Supply and Demand

Automakers underestimating demand also caused part of the shortage. After the initial drop in sales during the pandemic, dealers quickly moved to selling vehicles online and offered 0% financing offers. This led to sales skyrocketing, and because of the chip shortage, there weren’t enough new cars being made to replace the ones that sold so quickly. Demand has fallen in recent months, but the shortage in ready to drive cars has led to limited choices for those who have to purchase now.

Why Buy Now?

According to CoxAuto, the main reason people are purchasing new cars currently is that their current vehicle is damaged, unreliable, or a lease is expiring. This means that customers are spending less time in the market considering which vehicle to purchase, and considering less expensive options, such as used cars or economical models.

Purchasing a new car can have other benefits aside from the obvious. A more fuel-efficient car will save you money over time, despite being a large up-front purchase, and a newer car is less likely to need extensive repairs. If you’re spending a year’s worth of car payments on an older vehicle just to keep it on the road, it’s time to look for a new one. Safety features are also important to consider, and they can save in health care deductibles, auto insurance premiums, and days missed from work.

Looking For A New Car?

If you’re in need of a new car, you need a dealership you can trust to sell you a good car at a fair price, instead of taking advantage of you during the purchase. Red McCombs Drive Away Motors has been the most trusted dealership in Texas for over a decade. We work with dozens of financial companies to help people with damaged credit get the financing they need to buy a car, truck or SUV. Visit us at Red McCombs Drive Away Motors today, or drop by our nearest location!

Posted in Car Industry News