- Between the pandemic, winter weather in Texas ,and shipping problems around the world, automakers are able to manufacture fewer autos these days.
- Auto plants around the world—with Ford, GM, Honda, Mitsubishi, Nissan, Toyota, and VW among the companies affected—are stopping production because there's a global shortage of semiconductor chips.
- Some in-demand models are reportedly being hit with dealer markups as high as $10,000, and some Ford dealers have resorted to selling their demo models of the Ford Bronco Sport.
The thin line between just-in-time auto manufacturing and an idled production plant has become crystal clear again with the spreading effects of a global semiconductor chip shortage and other logistical problems.
That there's a chip shortage isn't news. We reported last month that the shortage would likely mean that a million fewer cars will be built around the world, costing the industry $61 billion in this quarter alone. The problem stems from a change in who the semiconductor manufacturers are making chips for right now.
At the start of the pandemic a year ago, automakers reduced their orders, thinking that they wouldn't be able to build as many new cars as they originally thought. When the market rebounded, automakers discovered that chip suppliers were busy fulfilling orders for computers and gaming consoles, given that the companies building consumer electronics didn't see a pandemic-related decline. Just the opposite, in fact.
Now, the chip shortage has caught up with vehicle supply at the dealership level and the trend isn't likely to change any time soon. Bloomberg collected a list of automakers that have announced some sort of production delay due to the chip shortage as well as the dramatic cold weather that hit Texas and other parts of the U.S. recently, affecting the production of some plastic and foam vehicle components. The list includes Toyota (which is pausing production in the Czech Republic), Honda (some plants in the U.S. and Canada), Nissan (U.S. and Mexico), VW (Portugal) and Mitsubishi (U.S.). General Motors and Ford have also halted some production. On top of all of this, there's also congestion at ports on the West coast of the U.S., and we don't yet know how the container ship that's currently stuck in the Suez Canal and adding to the global shipping backup might affect the industry.
Ford, for example, said that it will build some F-150 trucks and Edge SUVs in North America that are missing some parts, like electronic modules that require semiconductor chips, with a plan to install the missing components later. The automaker is already facing a shortage of some models, notably the new Bronco Sport, but that might not necessarily be due to the chip shortage. Still, some Ford dealers have started selling off their demo units of the Bronco Sport, which is usually not allowed, but Ford Authority, citing a letter sent to dealers, reported that the automaker is okay with dealers taking these steps, advising them that the two Bronco Sport demo models that were sent to dealers as part of the company's Mannequin Program no longer have to stay at the dealership for four months or 4000 miles before they can be sold. Some dealers, the website reports, have been adding $10,000 to the MSRP for the Bronco Sport, too, since they have so many more people who want one than they have units to sell.
The Wall Street Journal spoke with dealers about the vehicle crunch that started with the production halts from a year ago as the pandemic hit. The paper found that local supply is decidedly wanting compared to the number of vehicles the dealers usually have on hand. The industry had hoped to get back to relatively normal in 2021, but that isn't what's happening. Data from Wards Intelligence shows that the number of vehicles at or in transit to dealerships was down 26 percent in February 2021 compared to the same month in 2020. For pickup trucks, the number was closer to 50 percent. That all leads to a few unfortunate realities for anyone looking to buy a new car soon: you're likely looking at fewer choices on the lot, higher prices, or a longer wait time for your car to arrive.
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