Silicon Chip Shortage Is Now a Big Problem for Car Buyers

The car industry is recovering, but it’s glaring that it’s not catching up with the surging increase in new car demand. But what is most surprising is the tiny cog grinding the automotive industry to almost a halt: silicon chips shortage.

Why Is There a Chip Shortage?

These chips are tiny transistors made from silicon, an natural element. These chips are in the heart of virtually all electronic devices manufactured, including vehicular systems. The demand for silicon has been high in recent times. The raw materials come from Mexico and Japan and then these chips are manufactured in China, Taiwan, and the US. Which means, they need to be shipped to the US and ships are unable to deliver their loads to shore due the long backups at the ports.

Essentially, the COVID pandemic virtually caused the automotive industry to shut down, forcing the economy into a recession. As a result, vehicle manufacturers canceled orders for chips due to a forecasted plummet in car sales. But the plummet in sales did not last for long, as incentives and innovative ways to sell vehicles were created during this period, causing vehicle sales to recover.

The Effect on Consumers in the New Car Market

The ripple effect has been almost immediate in the US car market. When the car manufacturing plants started back up, there were no chips available. These chips had been bought up by other industries, causing car demand to outpace supply. This has made the parking lots of new car dealers look surprisingly empty. Already impatient customers now must wait, choose from the limited options available, or source from the used car market. This inevitably increased the prices of new cars to the point that people started turning to used cars as an alternative. The increased demand for used cars has been driving its prices up, making them unrealistically expensive. And it seems this discomfort may take a while to ease out.

So, until chips are available to the auto industry, you’ll need to take extra-good care of your vehicle so it lasts beyond this automotive nightmare.