The Latest Information on the Global Car Supply Chain Shortage
Tuesday, 14 February 2023
It’s no secret that the past few years have been chaotic across multiple industry sectors. Financial markets have taken significant hits, the effects of which have bled into home and automotive insurance.
The global automobile industry was left in complete disarray, courtesy of a combination of COVID-19 and international tensions. Now, with microchip manufacturers feeling the strain from an already disrupted supply chain, auto dealerships have found their inventories near empty, leaving buyers with few options for vehicles to purchase.
Experts predict that this crisis won’t be solved until at least 2024. However, car production is beginning to slowly increase; if you’ve been considering buying a new car, here is what you need to know.
Why There Was a Car Supply Shortage
The global microchip shortage caused automobile inventories to plummet. By virtue of this lack of microchips—an essential component of automotive systems—demand for cars has skyrocketed. This has become something that car manufacturers are struggling to keep up with as they have been forced to decrease production output.
The chip industry was already facing capacity constraints before the pandemic due to high demand from smartphone manufacturers. With global car sales increasing during lockdowns, vehicle makers required mass amounts of microchips but were unable to secure them in sufficient quantities. The resulting delays have equated to supply shortages for car dealerships.
With car supply chain problems resulting in a shortage of vehicles available for purchase, buying a new car may seem complicated. Nonetheless, there are still options available to car buyers and steps that can be taken in order to find the perfect vehicle despite said supply shortages. When you do find your dream car, remember to stay safe while driving!
How to Get a Car During a Supply Shortage
One way to combat vehicle supply shortages is to browse regional secondary car markets online. Resources or services such as Auto Trader Canada are great for consumers because they enable localised region specific searches. A buyer in the market for a vehicle can use this resource to find a car in their area for the best price. Additionally, car buyers should reach out to dealerships to inquire about available car models and pricing options.
Those interested in purchasing a vehicle amidst the ongoing supply shortages should be considering user reviews when car shopping. Consider the pros and cons of varying vehicle models and be as thorough as possible, looking to maximize the value of your dollar when purchasing a reliable vehicle.
Pricing is a massive component of the car-buying process and vehicle costs can be affected and determined by many factors such as past repairs, mileage, and a vehicle’s specific make and model.
It is also important to consider variable costs versus fixed costs when purchasing a vehicle; a variable cost is an unexpected expense that is not planned for, like having to pay for a new tire if a driver gets a flat. A fixed cost is an anticipated expense that the owner should be aware of and is paid regularly, the rate of which is unchanging. An example of a fixed cost would be auto insurance.
2023 Auto Industry Predictions
New Vehicle Sales Climb, Used Vehicle Sales Dip, and Net Auto Revenues Decline
Automakers are expected to rely more heavily on sales of vehicles to commercial and fleet customers like rental car companies or government agencies. Car manufacturers are emphasising profits by focusing on large client bases to make up for lost revenues caused by vehicle supply shortages.
New Vehicle Inventories to Rise
Inventory levels the past two years were at record lows due to supply chain disruptions that slowed production. But, expectations for an ease of consumer demand come as the automotive industry attempts to rev up production.
Car Buyers to Face Challenges of Vehicle Affordability
Vehicle affordability was already a concern when interest rates were low. This issue has become increasingly concerning as central banks continue their hawkish behaviour when enacting further monetary policy to limit the money supply and increase the value of the dollar, which will bring down inflation. This has caused vehicle unaffordability to reach record highs.
Used-Vehicle Values Will See Abnormal Depreciation
Despite used vehicle prices having risen significantly since the start of the pandemic in 2020, current depreciation levels are falling back to pre-pandemic norms. Pricing has dropped significantly recently, as much as 14.9% in the last year! Vehicle inventories are now close to figures that were seen in 2019 which bolsters hope that these strong market fluctuations will eventually stabilize.
What The Chip Shortage Means for Car Buyers
Many major automakers have resumed full production and this is expected to continue as more chips become available. This also means that dealership inventories will soon be back up to pre-shortage levels. With more cars becoming available, there will be plenty of options for buyers in terms of features and price points. In addition, dealerships may start offering more discounts and special offers in order to move inventory quickly.
It is beneficial to have an understanding of how to navigate vehicle supply shortages. By searching through secondary markets of used cars, and understanding associated costs like auto claims, buyers can better educate themselves on what to do when searching for a vehicle during a time when dealership inventories are very low.
At Billyard Insurance Group, we are proud to have some of the most competitive rates in the country. If you’re ready to save money on your car insurance, then get started on a free online quote today!