By 2023? Parts shortage will keep car prices high | Associated Press News

2021-12-13 19:54:43 By : Ms. Rui Sun

Toledo, Ohio (Associated Press) - As early as the spring, the shortage of computer chips that caused car prices to soar seemed to have finally eased. Some relief for consumers seems to be at hand.

This hope has now dimmed. Among the major producers of automotive-grade chips, delta variants in several Asian countries have caused a surge in COVID-19 cases, which has exacerbated supply shortages. It further delayed the restoration of normal car production and artificially kept the car supply low.

Analysts said this means that record car consumer prices-new and used cars, as well as rental cars-will continue into next year, and may not fall back until 2023.

The global shortage of spare parts is not only related to computer chips. Automakers are also beginning to see shortages of wiring harnesses, plastics and glass. In addition to automobiles, important parts of commodities ranging from agricultural equipment and industrial machinery to sportswear and kitchen accessories are also installed in ports around the world, because supply exceeds supply when the virus returns.

Glenn Mills, who runs four car dealerships in Canton, Ohio, said: "It seems that it will get harder before it gets easier."

Due to a shortage of parts, General Motors and Ford announced the closure of many plants in North America for one to two weeks, some of which produce popular full-size pickup trucks.

At the end of last month, the shortage of semiconductors and other components became so severe that Toyota felt compelled to announce that it would cut production in Japan and North America by at least 40% within two months. The reduction means that there were 360,000 fewer cars worldwide in September. Toyota has largely avoided the sporadic plant closures that plagued competitors this year, and now expects production losses to continue into October.

Nissan announced in mid-August that a chip shortage would force it to close its large factory in Smyrna, Tennessee, until August 30, and now says that the shutdown will continue until September 13.

Honda dealers are preparing to reduce shipments.

Honda spokesperson Chris Abbruzzese (Chris Abbruzzese) said: "This is an unstable situation that is affecting the entire industry's global supply chain, and we are adjusting production as needed."

As a result, car buyers are facing continuous price spikes that were once unimaginable. JD Power estimates that the average price of new cars sold in the United States in August set a record of just over US$41,000, nearly US$8,200 higher than two years ago.

With consumer demand still high, automakers have little pressure to discount cars. Automakers are forced to keep scarce computer chips and switch them to higher-priced models, such as pickup trucks and large SUVs, thereby pushing up their average prices.

The root cause of the shortage of computer chips that plagued automobiles and other industries was the outbreak of the pandemic early last year. U.S. automakers had to close factories for eight weeks to help stop the spread of the virus. Some parts companies have cancelled semiconductor orders. At the same time, tens of millions of people live at home, and the demand for laptops, tablets, and game consoles has soared.

With the recovery of automobile production, consumer demand for automobiles remains strong. But chip makers have shifted production to consumer products, causing a shortage of weather-resistant automotive-grade chips.

Then, just as car chip production began to rebound in late spring, the highly contagious delta variant hit Malaysia and other Asian countries that make chips and other auto parts.

In August, sales of new cars in the United States fell by nearly 18%, mainly due to a shortage of supply. Automakers reported that the number of new vehicles at US dealerships in August was less than 1 million, a 72% decrease from August 2019.

Consulting company Alix said that even if car production somehow immediately resumes the highest level of cars sold in the United States, it will take more than a year to achieve a more normal 60-day car supply and price drop. Partners have calculated .

"In this case," said Dan Hearsch, managing director of Alix Partners, "They won't even be able to overcome the backlog of sales, anticipate demand and build inventory until early 2023."

At present, many dealers have almost no new cars due to the shortage of spare parts and the spread of production cuts.

During a recent visit to the "Central Avenue Strip" in the suburbs of Toledo, Ohio, the road was full of dealers, but new cars were hardly found in these areas. Some dealers fill up their lots with used cars.

The supply is so low and the price is so high that a potential buyer, Heather Pipelow of Adrian, Michigan, said that she didn't even bother to find a new SUV at Jim White Honda.

"It's more than I paid to buy a house," she said sadly.

Ed Ewers of Mansfield, Ohio spent about two hours to a Subaru dealership in the Toledo area to buy a second-hand 2020 four-door Jeep Wrangler. He considered buying a new car, but decided to replace the aging Dodge Tour SUV with a used car in his price range.

Mills, who has insufficient new inventory at Honda dealers, said that because consumers have to pay high prices for new and used cars, dealers are trying to survive.

He said that he will not charge more than the list price-enough to cover the cost and make a profit. He also does not have to advertise or pay interest for a large number of vehicles. He said that many vehicles have been sold before they leave the factory.

Chip orders from nine months ago are now starting to arrive. But other components, such as glass or parts made with plastic injection molds, have been exhausted, Hirsch said. He said that due to the virus and widespread labor shortages, auto parts manufacturers may not be able to make up for production losses.

Some temporary reasons for hope have already begun to emerge. Siew Hai Wong, chairman of the Malaysian Semiconductor Industry Association, said that as more workers are vaccinated, chip production is expected to begin to return to normal in the fall.

He said that although Malaysia, Vietnam, Taiwan, Singapore and the United States all produce semiconductors, the shortage of only one chip will disrupt production.

"If there is chaos in Malaysia," Wong said, "there will be chaos somewhere in the world."

Automakers have been considering switching to an order-based distribution system instead of keeping large supplies at dealerships. But no one knows whether such a system will be more effective.

Ultimately, Hearsch suggested that the delta variant will pass and the supply chain should return to normal. He predicts that by then, automakers will line up multiple parts sources and stock key components.

Ravi Anupindi, a professor of supply chain research at the University of Michigan, said: "It will end, but the question is when will it end."

Associated Press writer Yuri Kageyama contributed to this report in Tokyo.