If you’ve been looking for a new or used car lately, you may have noticed the slim pickings.
It’s not just you, and it’s not just Missouri. Dealerships are low on inventory, largely because of a global shortage of semiconductors, also known as microchips, which are a key component of modern vehicles.
In Missouri, dealers are seeing 25-30% of their usual inventory, according to Doug Smith, president of the Missouri Automobile Dealers Association.
A shortage of that magnitude leaves “a very hungry consumer market,” Smith said.
The pandemic-driven shortage reared its head at the start of the year, and Smith predicts that production might not pick up again until around the fourth quarter of the year.
So, when’s the last time a shortage like this has shaken the auto sector?
“Never,” said Ivan Drury, senior manager of insights at Edmunds. In fact, the shortage has led some vehicles to appreciate in value.
“Many people have driven their vehicle for a year or two, and essentially had no depreciation, if not, in some situations, appreciation, which is completely unheard of in the U.S. vehicle market,” Drury said. Normally, cases of vehicle appreciation are reserved for classic or collectible vehicles, but with the current high demand for newer models of pickup trucks and SUVs, some owners are finding their vehicles commanding far higher value than a normal auto market would dictate.
“The only substitute for a new car is a used car,” Drury said.
Used car prices in Missouri are up 27% year-over-year, according to Carfax data. The average price of a used car in May was $21,480, up from $16,970 last May. That was still lower than the national average.
The rental car business is also contributing to the shortage. In the throes of the pandemic, rental car companies sold off a large portion of their fleets all at once, as few people were traveling and using rental car services.
“Typically, rental car companies will sell off, they kind of feed the used car market with cars that they’re getting rid of,” said Emilie Voss, director of public relations at Carfax.
Now that people are traveling again, instead of feeding used car inventories as they normally would, rental agencies are buying up used cars to build up their fleets again — and that’s competition for the everyday buyer.
Thousands of microchips can go into one of today’s new vehicles. Without them, production has stalled.
“Most of these vehicles are built, they’re on the production line, waiting for these computer chips,” Smith said.
Auto manufacturers around the world are set to lose $110 billion from the current semiconductor shortage, according to a report from AlixPartners, a global consulting firm.
“You’re not talking about missing an engine. We’re talking about something that’s very tiny, but is crucial to the vehicle’s production,” Drury said. “It really is just one little thing that’s taken down essentially the entire industry.”
“Acres upon acres” of new GM vehicles are waiting for chips to complete production at the General Motors assembly plant in Wentzville, KTVI reported in late May.
Plants around the country are desperate to meet demand, but they can’t do that without the chips. The Wentzville plant, which employs more than 3,000 workers, shut down for two weeks in early April and cut down one of three production shifts starting in late April due to the semiconductor shortage, according to the St. Louis Business Journal. The plant also moved up its annual scheduled downtime to start May 24 rather than a traditional June date, the Detroit Free Press reported.
Closures have also plagued auto plants in the Kansas City area. GM’s Fairfax plant has been closed since February and is scheduled to stay that way until July. Ford’s Claycomo plant is experiencing a delayed reopening and shift cuts that will affect more than 7,000 employees, WDAF reports.
Though the U.S. produces some of its own chips, a vast majority are produced overseas and imported, largely from East Asia.
Many automakers canceled their orders for semiconductors earlier in the pandemic, but when vaccinations increased and demand began to spike early this year, they were out of luck.
“When they came back to the chip manufacturers and said, ‘Hey, turns out, I still want those units,’ they were sidelined,” Drury said. “They were essentially stuck to the back of the list, and replaced by all these other consumer goods. So many of these chip makers make things for other industries, and auto is actually not the largest one for them.”
Advice for buyers
The best thing to do now is wait; Voss said 2022 seems to have a better outlook. But, for consumers without that luxury, there are still ways to save, and that includes being a bit less picky.
“We might think we know the color, the year, make, model, exactly what we’re looking for,” she said. “If you can be a little more open, that will help you be able to find what you’re looking for in stock.”