The chips are down again
Shortage may dent auto production until 2023
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 COVID19 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.
“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.
The global parts shortage involves not just computer chips. Automakers are starting to see shortages of wiring harnesses, plastics and glass, too.
Squeezed by the parts shortfall, General Motors and Ford have announced one- or two-week closures at multiple North American factories.
Late last month, shortages of semiconductors and other parts grew so acute that Toyota announced it would slash production by at least 40% in Japan and North America for two months. The cuts meant a reduction of 360,000 vehicles worldwide in September.
Nissan, which had announced in mid-August that chip shortages would force it to close its immense factory in Smyrna, Tennessee,
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.
In August, new vehicle sales in the U.S. tumbled nearly 18%, mainly because of supply shortages. Automakers reported that U.S. dealers had fewer than 1 million new vehicles on their lots in August — 72% lower than in August 2019.
Even if auto production were somehow to immediately regain its highest-ever level for vehicles sold in the U.S., it would take more than a year to achieve a more normal 60-day supply of vehicles and for prices to head down, the consulting firm Alix Partners has calculated.
“Under that scenario,” said Dan Hearsch, an Alix Partners managing director, “it’s not until early 2023 before they even could overcome a backlog of sales, expected demand and build up the inventory.”
Automakers are starting to see shortages of wiring harnesses, plastics and glass, too.