What Drivers Should Know About the Car Shortage

Car shortage: this has been on the mind of most automotive professionals due to the state of car inventories in 2022. While there has been some progress made, there are still many questions floating around. What is causing the car shortage? What is making prices rise? How long will it last? Here, we will attempt to answer what everyday drivers should know about the car shortage, and how it may affect their future automotive purchases.

What is Causing the Car Shortage?

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Like many industries affected by the COVID-19 pandemic, the automotive industry has taken a good number of hits. While material shortages are occurring worldwide, there are many factors hitting the market that combined result in a car shortage.

The first is the semiconductor chip shortage. Manufacturing in China majorly slowed at the start of the pandemic, and the electronic industry experienced a boom in demand for electronics, due to the number of people working from home. As a result, the semiconductor chip supply was rerouted to these businesses, and this change left a limited supply to the remaining industries that rely on these chips for their products.

During the height of the pandemic, cars that used these chips were not in high demand, since consumers were staying home. However, the demand for cars came back sooner than expected, as vaccines lifted the need for restricted traveling. The market became flooded with customers itching to get back out on the road after over a year of quarantine, but they were met with a low supply that was unable to pick up as fast as the market demanded. Fewer chips meant fewer new cars to go around.

Another factor affecting the shortage is the fact that many car sellers were forced to sell their stock to make up for losses during the fiscal years of the pandemic. Since the extra stock was sold off then, there is an even bigger gap in demand now that the industry is back online.

What is Making Costs Rise?

Costs of cars are rising due to the scarcity of parts and the need for car companies to continue maintaining their staff. The price of raw materials like steel has greatly increased in the past year, with some reports stating it’s the widest spread inflation of costs since 2011. Materials are taking up a more significant percentage of vehicle costs. As previously mentioned, the chip shortage is greatly affecting the number of cars being produced today. Vehicles need these chips to act out basic functions like locking doors, information systems, and driver-assist features to name a few. With fewer chips to go around, it is more expensive to make cars, and harder to make a profit. Because dealers must be able to pay their employees their wages, the difference is made up by increased consumer cost.

Combining these supply chain shortages added to the costs of labor, which are also skyrocketing due to the worker shortage, cars across the globe are seeing higher prices.

Who is Affected by the Car Shortage?

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Drivers and sellers alike are affected by the car shortage. Drivers in the market for new vehicles are unable to purchase from local dealerships due to the limited inventory, and many are forced to travel hundreds of miles to reach a dealer with their choice of car. With less inventory available, dealers are finding it harder to meet sales expectations. Many dealerships are essentially allowing drivers to pre-order cars so that they can reserve their rights to newly manufactured vehicles. The problem with this is that these waiting lists are becoming so long, that many will have to wait years before receiving their paid-for vehicle.

The car rental industry is also taking a big hit. Since many of these businesses sold off access inventory to make up for pandemic losses, they are at a standstill now that more Americans are traveling once more. They are unable to replace their fleets due to the manufacturing shortage.

How Long Will the Car Shortage Last?

One of the biggest concerns in automotive work is how long will it take for the industry to recover from the car shortage. While some believe 2022 will be the year of recovery, many experts estimate the supply chain shortages will have lasting effects until as long as 2025. When considering how many people buy cars each year, how many industries depend on new car purchases, how many are forced to replace their cars due to accidents, how many people rent cars each year. In the meantime, the industry expects demand will continue to grow. In response, automakers will negotiate who will receive the limited materials supply and distribution of vehicle inventory.

In response, most car dealerships will not likely be able to negotiate on pricing for the next few years, so keep that in mind when saving up for a new vehicle. Many drivers are turning to maintaining their current cars or upgrading older vehicles, which has brought up a new demand for parts and services. Many dealers are extending repair hours and services in response to this demand. Overall, it will take the market time to recover from these devastating losses, but execs are constantly on the lookout for innovations and solutions to meet demand.

For More Information, Call Superior Honda

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Honda works closely with our customers and manufacturers to keep up-to-date information about the state of the car shortage. While our business has been affected by this shortage, it has not stopped Superior Honda from providing expert services on existing vehicles. Keeping your car tuned up and taken care of is the best way to protect your vehicle during this shortage, and we are doing our best to provide the best deals possible to new car buyers. Superior Honda is here for our drivers during this trying time and guarantees our services are more reliable than ever. For more information about the shortage or Honda’s vast array of services, contact us today.

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