You may notice something odd when you drive by car dealerships — there aren’t many cars! This isn’t because cars are flying off showroom floors, as nice as that would be for the automotive industry. For the past several months, a shortage of one tiny part — the semiconductor microchip — has all but halted car production. Here’s how that happened and what it means for dealers.
Why there’s a shortage
The average car has about 1,400 microchips that operate everything from seatbelt sensors to infotainment systems. Building one microchip takes about three months. Due to the pandemic, weather events in Taiwan, and a fire at a Tokyo plant, production of microchips has faced significant setbacks. Only 12% of microchips are made in the US, meaning the country relies on imports from other places. These microchips power almost every piece of modern-day technology. With ongoing travel restrictions, items that make working at home and connecting with others easier, like cell phones and laptops, take priority over personal vehicles.
How it impacts dealers
The supply of microchips ran low as much of the world went into lockdown. Transportation became less of a priority, so sending microchips to car manufacturers went to the back burner. This meant that fewer new cars could be produced. With less new car inventory coming in, prices increased. Used cars became the only game in town, but they became scarce because consumers weren’t trading them in for new cars. As a result, new and used cars are thousands of dollars more expensive than before, and they’re few and far between.
What’s being done about it
Some manufacturers, like General Motors and Nissan, have started removing chips from their vehicles before selling them. Nissan, for example, is removing GPS capabilities since most customers use smartphones for navigation. The US government’s infrastructure proposal is dedicating $50 billion toward the American semiconductor industry to help combat the shortage. The current forecast is that the situation will improve going into 2022.
The semiconductor microchip shortage caused significant shifts in the automotive industry. However, people still need cars, especially now that they’re traveling again. Find out how OATA can help your dealership get more done in less time today. Give us a call at 407-574-5485 or get in touch with us online.
