Car shopping has been a rollercoaster ride since the COVID-19 pandemic hit the U.S. last spring, and customers shouldn’t unbuckle their seat belts quite yet. First, automakers shuttered their factories as many states’ stay-at-home orders prompted dealership showrooms to shut down. Demand plummeted and automakers quickly responded with incentives and financing offers to revive confidence. The plan worked — only a little too well. As dealers reopened, consumers snatched up vehicles faster than automakers could produce them. Now, a global microchip shortage is causing major production delays, and vehicle inventory has sunk again.
The current global microchip shortage may be the elephant in the room, but according to Tyson Jominy, J.D. Power’s vice president of data and analytics, the inventory struggles can be traced all the way back to May 2020, when increased demand and COVID-related supply challenges first created a shortage among pickup trucks.
Before the industry was able to get back on its feet and replace diminishing inventory, a burgeoning microchip shortage layered on another supply shock. The chip shortage has disrupted production for every major auto brand, and a supply issue of this magnitude is uncharted territory.
Vehicle manufacturers aren’t only competing against each other for microchips, but also players in other industries, namely, consumer electronics.
“There hasn’t been one component that has hampered this many companies and products,” Fiorani said. “It touches so many parts of the car, from power controllers to navigation, to power seats, everything like this has a semiconductor in it. It can stop everything. Any one of them can be a linchpin that brings everything down.”
Automakers and the U.S. government are both working to address the shortages. While Ford has shut down production for some models due to the microchip shortage, automakers like Nissan and GM have continued to build vehicles, though without some components that require chips. Just last week, the U.S. Senate took a bipartisan step forward to fight the inventory crisis by passing a bill that invests in domestic microchip production, among other things.
As the first action step to address the shortage, the U.S. Senate passed a $190 billion legislation package to compete with Chinese tech, Reuters reports. According to the Congressional Budget Office, $54 billion will be allocated specifically to domestic production of semiconductor and telecommunications equipment, with $2 billion of that reserved for chips used by automakers. The bill still needs to pass the House of Representatives, where it reportedly faces a longer timeframe, but President Biden has voiced support to sign the bill into law.
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