TOLEDO, Ohio (AP) – In the spring, the lack of computer chips that had pushed up car prices eventually seemed to slow. There seems to be some relief for consumers.
That hope has faded. An increase in COVID-19 cases from the delta variant in several Asian countries that are the main producers of automatic quality chips worsens the lack of supply. It further delays the return to normal car production and keeps the supply of vehicles artificially low.
And that means, analysts say, record consumer prices for vehicles (new and used, as well as rental cars) will extend into next year and may not return to land until 2023.
The global shortage of parts doesn’t just involve computer chips. Car manufacturers are also beginning to see a shortage of wiring harnesses, plastics and glass. And beyond cars, the vital components of goods ranging from agricultural equipment and industrial machinery to sportswear and kitchen accessories are also bottled in ports around the world, as demand outstrips supply ahead. of a resurgent virus.
“It looks like it’s going to get harder and harder before it’s easier,” said Glenn Mears, who runs four car dealerships in Canton, Ohio.
Compressed by the lack of parts, General Motors and Ford have announced one- or two-week closures at several U.S. factories, some of which produce their very popular full-size trucks.
Late last month, the shortage of semiconductors and other parts became so strong that Toyota felt compelled to announce that it would reduce production by at least 40% in Japan and North America for two months. The cuts saw a 360,000 reduction in vehicles worldwide in September. Toyota, which largely avoided sporadic factory closures that have affected rivals this year, now predicts production losses in October.
Nissan, which had announced in mid-August that the shortage of chips would force it to close its huge factory in Smyrna, Tennessee, by Aug. 30, now says the shutdown will last until Sept. 13.
And Honda dealers are gearing up for fewer shipments.
“This is a fluid situation affecting the entire industry supply chain and we are adjusting production as needed,” said Chris Abbruzzese, a spokesman for Honda.
The result is that vehicle buyers face persistent and unthinkable price hikes. The average price of a new vehicle sold in the United States in August hit a record just over $ 41,000, nearly $ 8,200 more than just two years ago, according to JD Power.
With consumer demand still high, carmakers feel little pressure to discount their vehicles. Forced to keep their meager computer chips, carmakers have routed them to higher-priced models (large vans and SUVs, for example), which raises their average prices.
The roots of the shortage of computer chips plaguing the automobile and other industries come from the pandemic eruption early last year. U.S. automakers had to close factories for eight weeks to help stop the spread of the virus. Some parts companies canceled semiconductor orders. At the same time, with tens of millions of people at home, the demand for laptops, tablets and game consoles skyrocketed.
As car production resumed, consumer car demand remained strong. But chip makers had shifted production to consumer goods, creating a shortage of quality weather-resistant automotive chips.
Then, just as automatic chip production began to pick up in late spring, the highly contagious delta variant affected Malaysia and other Asian countries where chips are finished and other car parts are manufactured.
In August, sales of new vehicles in the United States fell by about 18%, mainly due to supply shortages. Car manufacturers reported that U.S. dealerships had less than a million new vehicles in their batches in August, 72% less than in August 2019.
Even if car production somehow immediately regained the highest level of vehicles sold in the United States, it would take more than a year to get a more normal 60-day vehicle supply and lower prices, the consultancy Alix Partners has calculated.
“Under this scenario,” said Dan Hearsch, CEO of Alix Partners, “it’s not until early 2023 that they won’t even be able to overcome sales backlog, expected demand and build up inventory.”
At the moment, with the supply of parts scarce and the reduction of production, many dealers are almost without new vehicles.
On a recent visit to the “Central Avenue Strip” on the outskirts of Toledo, Ohio, a road full of dealerships, few new vehicles could be found in the lots. Some dealers filled their lots with used vehicles.
The offer is so low and the prices so high that a buyer, Heather Pipelow, of Adrian, Michigan, said she didn’t even bother looking for a new SUV at Jim White Honda.
“It’s more than I paid for my house,” he said sadly.
Ed Ewers of Mansfield, Ohio, traveled about two hours to a Subaru dealer in the Toledo area to buy a used 2020 four-door Jeep Wrangler. He considered buying new ones, but decided that a used vehicle was more in its price range to replace an aged Dodge Journey SUV.
Mears, at the Honda dealership whose new inventory is missing, said dealers are able to survive because of the high prices consumers have to pay for both new and used vehicles.
It charges only the price of the sticker, he said, with enough profits to cover expenses and make money. You also don’t have to advertise or pay interest on a large stock of vehicles. He said many vehicles are sold before they arrive from the factory.
Now the chip orders that were placed nine months ago are starting to arrive. But other components, such as glass or parts made from plastic injection molds, have run out, Hearsch said. Due to the virus and the general shortage of labor, he said, it is possible that spare parts manufacturers will not be able to compensate for the loss of production.
Some temporary cause of hope has begun to emerge. Siew Hai Wong, president of the Malaysian Semiconductor Industry Association, says chip production should return to normal in the fall as more workers are vaccinated.
Although Malaysia, Vietnam, Taiwan, Singapore and the United States produce semiconductors, he said, the lack of a single type of chip can disrupt production.
“If there are disruptions in Malaysia,” Wong said, “there will be disruptions somewhere in the world.”
Automakers have been considering switching to an order-based distribution system instead of maintaining huge supplies to dealer lots. But no one knows if this system would be more efficient.
Finally, Hearsch suggested, the delta variant will pass and the supply chain should return to normal. By then, he predicts, automakers will align multiple parts sources and store critical components.
“There will be an end, but the question is really when,” said Ravi Anupindi, a University of Michigan professor who studies supply chains.
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AP writer Yuri Kageyama contributed to this report from Tokyo.
Nissan