Few industries have felt the impact of recent supply chain issues quite like the car industry.
Supply chain issues that began during the COVID-19 pandemic have led to massive inflation in the car industry that is bringing all sorts of challenges to car manufacturers, dealers, and buyers around the world. And these problems have only been elevated by global tensions and an increased demand for electric vehicles.
Unfortunately, many industry analysts think relief may not arrive for months – if not over a year!
Here’s what you need to know…
Why are car prices still so high?
For over 50 years, the just-in-time (JIT) method has been the most dominant manufacturing approach in the automaking industry. The JIT system helps manufacturers drive down inventory costs because they receive the necessary parts at the precise moment they’re needed for the production process.
So, when the pandemic halted the car part supply chain, this production system simply shut down, leaving manufacturers to come up with new approaches to keep up with the consumer demand.
The result? Record-low inventories on dealership car lots and a big spike in prices of the vehicles that ARE still available for purchase.
Chip shortage update
These days, if you’re looking for a vehicle with all of your favorite high-tech components – from rear seat climate control to front assist to full touchscreen capability – you may have a harder time than you think!
That’s because car manufacturers are still experiencing a shortage of semiconductor chips, the microprocessors that power almost every advanced system feature in modern vehicles.
Even before the pandemic, chip supplies were relatively sparse. But when the pandemic struck in March 2020, consumer demand for new cars plummeted. As millions of Americans started working from home, they started ordering upgraded, powerful consumer technology (smartphones, computers, web cameras, etc.) – technology that requires microchips.
When demand started to rise again, chip suppliers simply didn’t have enough microchips to go around. As a result, vehicle production has slowed significantly over the last couple of years.
Much like what happened in grocery stores early during the pandemic with toilet paper and hand sanitizer, many car manufacturers have taken to “overordering” microchips, leading to an even more unbalanced supply chain that may take a while to return to normal.
But, the industry has been seeing glimmers of hope!
Chip-makers are working hard to ramp up supply, exploring possibilities of expanding and building new microchip plants. Some car brands – like Mercedes Benz and BMW – are now receiving enough chips to bring production back to full speed. However, it is still too early to tell whether this positive trend is here to stay.
Why is it taking so long for car repair shops to get parts?
Many car owners have experienced first-hand the impacts of COVID-19 on car part supply issues. Drivers are being forced to manage without their vehicles for months while waiting for the right parts to come in for repairs.
If you haven’t experienced it yourself, you’ve probably talked to someone who has. We’ve heard many stories like this over the last year or so.
Once production of new cars came to a screeching halt, the demand for replacement car parts spiked. Now, it’s become exceedingly difficult for many auto service technicians to find the right parts…not to mention, more expensive. Over the past year, automotive parts increased in cost by 17%, according to the St. Louis Federal Reserve.
Now, with the global tensions in Eastern Europe, certain parts sourced and developed in Ukraine – like wiring harnesses and the neon gas necessary for much of our cars’ advanced technology – are becoming even HARDER to track down.
And with the national push for more sustainable, energy-efficient transportation, certain battery components for electric vehicles (EVs) are coming up short, too.
Performance Auto Specialists | Wilmington, NC
Performance Auto Specialists is proud to offer eastern North Carolina efficient, affordable European car repairs, with years of experience fine-tuning our craft. We service European vehicles 3 years and older that are no longer covered under a factory, bumper-to-bumper warranty.
Ready to give your European car the maintenance it deserves? Get fast and reasonably priced European auto repair in Wilmington here with Performance Auto Specialists! Schedule an appointment or call us at (910) 343-1650.
Tags: car industry