Why Is There a New Car Shortage?

2022 RAM 2500 with man sitting on tailgate

 

Anyone who has tried to purchase a vehicle during the last two years already knows why car dealerships are low on inventory, but here’s a quick primer if you’re just hitting the market: during the Covid-19 pandemic, car sales collapsed—while consumer demand for electronic devices and appliances that use semiconductor chips surged. When demand for new cars began to revive, automakers were surprised to find out that their semiconductor suppliers had partnered with consumer electronics manufacturers instead.

But why did the microchip shortage cause a new car shortage? Nearly all new models use semiconductor chips in their safety systems, touch screens, and other electronics—so a short supply of semiconductor chips meant that auto manufacturers couldn’t produce vehicles fast enough to meet demand.

When Will Car Inventory Return to Normal?

The microchip shortage has persisted for two years and counting, so it’s no surprise that many people are asking why car dealerships are still low on inventory. So, how long do Seattle and Tacoma buyers have to wait until the chip shortage will end and car inventories return to normal levels?

Expert options on the matter are all over the map—ranging from optimistic estimates for an end to the microchip shortage arriving by late 2022 to more sober predictions that the present inventory shortage will last well into 2023.

Even if we can’t be sure when the chip shortage will end, we do have an idea of what will happen after it does. The current microchip shortage is likely to be followed by a period of oversupply. If production capacity ramps up in late 2022, then the industry would face an oversupply of auto semiconductors at some point during 2023 at the earliest.

How the Microchip Shortage Will Change the Way We Buy Cars

Despite being well aware of the consequences of the microchip shortage, the latest Car Buyer Journey (CBJ) Study from Cox Automotive reveals that car buyers themselves are feeling more optimistic. Many are more than happy to special order a vehicle directly from the factory and wait weeks for it to arrive. And while few buyers are willing to pay more than MSRP, more and more are taking the time to shop around for the best price.

When all is said and done, it makes more sense to ask how car buying will change going forward, rather than when the chip shortage will end or when car inventory will return to normal. Many dealerships are already switching to an approach where they keep fewer models on the lot, mainly for test drives, and instead offer buyers the opportunity to customize and order their cars from the factory.

Here’s what South Hill buyers should expect:

  • Factory Orders: The option to custom order your car directly from the factory will become more commonplace. Dealerships will likely keep a smaller inventory of vehicles on the lot so that buyers can test drive a similar model before putting in a custom order.
  • Deleted Features: At least a dozen automotive brands have opted to resume production of popular vehicles without some of the features that require semiconductor chips. For example, Ford chose to move forward with the 2022 Explorer without the rear seat climate controls. Other models may hit the market sans features like automatic stop/start, touchscreens, and park assist systems. For the most part, manufacturers are offering compensation in the form of cash or credit, and the option to add the missing tech at a later date if possible.
  • Used Car Shortages: With new cars in short supply, many dealerships faced a run on their used car inventories, especially Certified Pre-Owned models. You can expect the used car shortage and higher used car prices to persist, as well.

Special Order Your New Car at Universal Auto Group

Interested in exploring your buying options near Tacoma? We’re happy to tell you more about how the special order process works! Be sure to check out our new vehicle specials online, and then reach out to our finance department for details about our flexible leasing and financing plans.

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