2020 was a strange year for computer chip manufacturers worldwide. Automobile factories shut down for much of the summer, and demand for personal electronics skyrocketed with millions of people working from home. So the industry realigned to serve that market, instead. Then as vaccination took off, a faster-than-predicted economic rebound led to an abrupt surge in demand for new vehicles. The semiconductor factories which make those chips couldn’t pivot back fast enough.
A shortage of computer chips is slowing the production of new automobiles worldwide, especially cars and smaller SUVs. Now nearly halfway through 2021, it’s outright difficult to buy a new car, and if you find one, expect to pay well over the sticker price.
“It’s like toilet paper was a year ago,” said Michelle Krebs, an analyst for Cox Automotive. “Everyone is rushing to buy a car.”
Car dealerships are selling out of inventory faster than they can stock it, and prices keep climbing. Even used vehicles are selling for 10 percent over what they did as recently as April. Last month, the average list price of a used car was just over $22,000, 14 percent higher than April 2020. Even rental cars are currently scarce, as rental companies seize the opportunity to sell their cars at these artificially high prices.
In April, the total new vehicle inventory of the United States was approximately 1.9 million, just over half what it was the year before. That number is about as many cars as will sell in 33 days at current pacing.
But it is inevitable that the computer chip shortage will end, and vehicle production will rev back up. When that happens, prices will stabilize, dealership discounts will be back on the table, though prices may not return to pre-pandemic levels.
“I do think we are on the verge of possibly a different kind of paradigm for how vehicles are distributed,” said Krebs.