Shortages of auto parts will keep prices high

TOLEDO, Ohio — Back in the spring, a shortage of computer chips that had sent auto prices soaring appeared, finally, to be easing. Some relief for consumers seemed to be in sight.

That hope has now dimmed. A surge in COVID-19 cases from the delta variant in several Asian countries that are the main producers of auto-grade chips is worsening the supply shortage. It is further delaying a return to normal auto production and keeping the supply of vehicles artificially low.

And that means, analysts say, that record-high consumer prices for vehicles — new and used, as well as rental cars — will extend into next year and might not fall back toward earth until 2023.

The global parts shortage involves not just computer chips. Automakers are starting to see shortages of wiring harnesses, plastics and glass, too. And beyond autos, vital components for goods ranging from farm equipment and industrial machinery to sportswear and kitchen accessories are also bottled up at ports around the world as demand outpaces supply in the face of a resurgent virus.

“It appears it’s going to get a little tougher before it gets easier,” said Glenn Mears, who runs four auto dealerships around Canton, Ohio.

Squeezed by the parts shortfall, General Motors and Ford have announced one- or two-week closures at multiple North American factories, some of which produce their hugely popular full-size pickups.

Late last month, shortages of semiconductors and other parts grew so acute that Toyota felt compelled to announce it would slash production by at least 40 percent in Japan and North America for two months. The cuts meant a reduction of 360,000 vehicles worldwide in September. Toyota, which largely avoided sporadic factory closures that have plagued rivals this year, now foresees production losses into October.

Nissan, which had announced in mid-August that chip shortages would force it to close its immense factory in Smyrna, Tenn., until Aug. 30, now says the closure will last until Sept. 13.

And Honda dealers are bracing for fewer shipments.

“This is a fluid situation that is impacting the entire industry’s global supply chain, and we are adjusting production as necessary,” said Chris Abbruzzese, a Honda spokesman.

The result is that vehicle buyers are facing persistent and once-unthinkable price spikes. The average price of a new vehicle sold in the U.S. in August hit a record of just above $41,000 — nearly $8,200 more than it was just two years ago, J.D. Power estimated.

With consumer demand still high, automakers feel little pressure to discount their vehicles. Forced to conserve their scarce computer chips, the automakers have routed them to higher-priced models — pickups and large SUVs, for example — thereby driving up their average prices.

The roots of the computer chip shortage bedeviling auto and other industries stem from the eruption of the pandemic early last year. U.S. automakers had to shut factories for eight weeks to help stop the virus from spreading. Some parts companies canceled orders for semiconductors. At the same time, with tens of millions of people hunkered down at home, demand for laptops, tablets and gaming consoles skyrocketed.

As auto production resumed, consumer demand for cars remained strong. But chipmakers had shifted production to consumer goods, creating a shortage of weather-resistant automotive-grade chips.

Then, just as auto chip production started to rebound in late spring, the highly contagious delta variant struck Malaysia and other Asian countries where chips are finished and other auto parts are made.