By Michelle M. Ryan
LANSING, Ill. (June 21, 2023) — In June of 2021, The Lansing Journal reported on car shortages affecting auto dealerships as microchips were in short supply. The main cause of the shortage was the COVID-19 pandemic, which temporarily shut down overseas factories that manufacture microchips. As microchips are needed for other regular household devices such as TVs, stereos, phones, computers, refrigerators, washers and dryers, and microwave ovens, these types of electronics became the priority over new vehicles.
At the time, the shortage resulted in a 90% reduction of new car inventory for Phillips Chevrolet in Lansing. Instead of the usual 500 new vehicles in their lot, only about 50 were available. As of this writing, Phillips Chevrolet of Lansing has 92 new vehicles, and they’re not the only ones with numbers on the rise. Napleton’s River Oaks Chrysler Dodge Jeep Ram in Lansing also dropped from their usual couple hundred vehicles to about 75 in 2021. They have resurged to 100 new vehicles.
In 2019 before shutdowns occurred globally, Americans bought more than 17 million cars. In 2022, 13.9 million were purchased, according to Kelley Blue Book. There was no drop in demand for vehicles throughout that time. Automakers couldn’t build cars fast enough because of the microchip shortage.
What exactly is this much-coveted item, the microchip, and why is it so important?
Toyota of North Charlotte provides a detailed explanation: “Car chips are also called semiconductor chips or microchips. They’re the brain in modern electronics and they work as a type of electrical circuit to control the flow of electrons. They’re typically made of silicon and have a series of tiny transistors that help control the aforementioned flow of electrons. The chips are small with its transistors about 10,000 times smaller than a human hair.”
Furthermore, “it’s a very complex process to create even one chip. A basic chip takes close to 12 weeks to create, while a more advanced one can take up to 20 weeks. Plus, there are only a few semiconductor chip plants in the world.” Today’s vehicles can contain hundreds of microchips with electric vehicles ranging into the thousands.
Another contributing factor to the shortage was the war in Ukraine that disrupted the global supply of neon gas, which is used to make semiconductors. The quanitity of semiconductors in vehicles is ever-increasing, and the shift to electric vehicles is only going to exacerbate that trend. Some automakers have responded by changing how they buy chips. General Motors is working to design cars that use fewer higher-power chips that control multiple functions, Kelley Blue Book said.
Changing car market
By the end of 2022, the average new car sold for more than $49,500 – almost 5% higher than a year before. Automakers worldwide have trimmed nearly 350,000 vehicles from production so far in 2023.
“Prices for both new and used vehicles are set to decrease as supply chain issues abate and inflation is poised to keep easing” according to a recent estimate by J.P. Morgan. Per the financial firm, new vehicle prices are slated to go down 2.5-5% while used cars may go down by 10-20%.
Despite the pandemic, the auto industry was already having challenges with major investments in electrification and autonomous driving. Sales were down in many markets hurting revenue and profitability. According to IBM, history tells us the automotive industry will likely recover, and the winners will probably become stronger and more focused. Half of surveyed automotive executives say that to succeed or even survive in the next 10 years, they need to reinvent their organizations with digital technologies, supported by data.
Phillips Chevrolet is located at 17730 Torrence Avenue, Lansing, IL. Napleton’s River Oaks Chrysler Dodge Jeep Ram is located at 17225 Torrence Avenue in Lansing, and Napleton’s River Oaks Honda is located at 17220 Torrence Avenue in Lansing.