Chip shortage to throttle car production into 2023

Business

(NewsNation) — When even BMW can’t get the chips it needs to make its luxury vehicles, you know the shortage is serious.

Speaking Monday, BMW CEO Oliver Zipse predicted the chip shortage, the lack of semiconductor chips that run everything from power windows to intricate engine and emission systems, will last well into 2023, meaning car prices for both new and used vehicles won’t be coming down anytime soon.

The COVID-19 regulations largely responsible for the chip shortage are all but gone, but the gap left in supply by the long drawdown in production isn’t something that can be fixed overnight. According to the National Automobile Dealers Association, the chip shortage has reduced dealer inventories to 40-year lows.

“You don’t have to go very far to drive and see dealership lots very thin with inventory and it’s changed the dynamics of car buying and car leasing dramatically for dealers and consumers,” said Bob Smith, with the Greater Los Angeles New Car Dealer Association.

Thanks to the inventory shortage, in 2021 the price of a new car went up 12 percent on average, and the price for a used car rocketed up by 41 percent. Rick Flagelle, with Never Say No Auto, said, “I’ve been doing this 25 years — you know generally around this time of year tax season they’ll go up because there is a demand for them, but nothing near like this.”

NADA chief economist Patrick Manzi says inventory levels aren’t expected to come back up until 2023, echoing the prediction made by BMW. The CEO of Volkswagen, which has halted production at several factories, has an even gloomier prediction, saying the problem won’t be under control until 2024.

“We kind of thought we would be out of it by now, but we are now smart enough to understand that when the supply chain disruptions happen, it takes years for it to remedy itself,” Smith said.

So, keep your oil changed, your tires replaced and your regular service up to date on your current vehicle, since it’s likely you’ll need to keep that set of wheels for a while yet.

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