Cars are scarce right now, and COVID-19 is to blame.
Well—COVID-19 was the first big problem that caused the automotive industry to get backed up. When manufacturing plants closed last March, it kicked off a downward spiral that has only been exacerbated by other supply problems. From chip shortages to plastics delays, these are the obstacles that may be standing between you and that new car you’re dreaming of.
It’s a temporary problem but for the short term the prognosis isn’t great.
COVID-19 Plant Shutdowns
When the world shut down in 2020 as a result of the COVID-19 pandemic, automotive manufacturing plants were part of that shutdown. And depending on their location, some plants remained closed for weeks or months at a time. When manufacturing did kick off again, it wasn’t without its delays; some plants have been shutting down operations for a week or more at a time due to a shortage of parts or the spread of COVID-19.
You may not have noticed this early in the pandemic; most US dealerships stock between 30 and 90 days of inventory, so buyers who sought out new cars in March, April and May were likely able to get the cars they wanted. And by June, assembly plants that had supplies–again, that 30 to 90 day supply–were able to produce them. But when the supply chain fell out of sync, the buildup of issues became the issue. And because different plants around the world have been starting up production at varying times, it’s been really hard to maintain a steady work flow. So, since March of 2020, the production and moving of automotive goods has been pared down below normal levels, and that means we’re seeing fewer new cars roll off the production line.
You’ve probably heard about the ongoing semiconductor chip shortage. These chips are responsible for so many crucial functions on our cars: infotainment systems, braking systems, and power steering. Basically, you can’t make a new car without it—and up to 40 percent of a car’s cost is said to account for chip-powered components by 2030.
But these chips are hard to come by. The chip supply largely met demand until the pandemic hit, at which point chip production plants closed but demand soared. Think about how many new electronics you’ve purchased to make life easier for you at home, like a new laptop, a larger TV, or gaming consoles for your kiddos. People have been looking for ways to keep themselves entertained or steadily working, and those things generally eat up chip supply.
The chips that do get produced are headed to high-demand products like Xboxes, Chromebook laptops, Playstations, TVs, and more. These are products with a huge amount of backorders, so they take priority over cars that aren’t sold yet.
As you can imagine, there are now automotive production plants left at a standstill while they wait for their chip order to be processed.
Remember the big winter storm in Texas that left millions of people without power and clean water for about a week in February? That wasn’t without its consequences. Chemical plants that produce the plastics used in automotive manufacturing closed during that time, which has led to a global supply chain disruption—a disruption that still hasn’t evened out.
These plastics are responsible for things like seat foam and dashboard components, but those aren’t integral, so the plastics being produced are being shipped off to make medical goods and food packaging. The automotive industry will be left in limbo—and any plastics it does receive will be more expensive, which will be reflected in the cost of your car.
Stuck On a Boat
And we can’t forget the poor old Ever Given, the ship that blocked the Suez Canal, one of the world’s most integral shipping routes. The auto industry—like countless other industries—relies heavily on the timely transport of goods through that canal. At least two auto transport vessels, the Morning Star and the Hoegh London, were stuck waiting for the canal to clear.
But that’s not even counting the countless other ships of raw materials that will see their final destination in the form of four-wheeled transportation, or the countless ships waiting off the coast of California and other locations waiting to unload their cargo. And because of pandemic protocols, it can take 2 to 3 times longer to unload a cargo ship these days.
As a result, we can expect a shortage of imports from manufacturers like Volkswagen, BMW, Audi, Volvo, and Mercedes-Benz as well as car components, like Bosch sound systems. In an already-delayed industry, any added shortage is going to hurt.
Fuel prices are also rising as a result of oil trapped on tankers, also waiting to get to port. If you’ve noticed you’re spending more at the pump, that’s why.
What Does It Mean For You?
If you’re in the market for a new car, now isn’t a great time to buy. Dealers often have limited stocks of vehicles because fewer vehicles have been produced. That means you’re much less likely to receive a good deal or to finagle a few discounts. There’s a huge demand for cars right now, which was entirely unprecedented. It normally takes a while for the economy to stabilize after an economic depression like the one brought on by the pandemic, but auto sales continue to skyrocket as people receive their stimulus checks or tax returns. And with demand exceeding supply, dealerships know they can sell a car for close to the asking price. They don’t have to entertain your haggling.
There’s also a severely reduced inventory—so you may not be able to find a model with all the bells and whistles sitting on a lot near you. American- and European-made cars seem to be the hardest hit, with Asian-based brands residing in countries that had at least a little bit more control over the spread of COVID-19 and, as a result, were able to get back into production in a more timely fashion. But with surging demand, it’s likely even those machines will be more expensive. Even used cars are seeing a huge spike in price and demand to compensate for the lack of new cars!
All things considered, if you can hold out for a few more months until supply chains start to regulate, you’ll likely be rewarded with lower prices, greater selection, and the ability to haggle for a much better deal.