SHOPSMART AUTOS – CUSTOMER INFORMATION – SEPTEMBER 23, 2021 – Part 2
Chip shortage likely to keep car prices sky-high through 2023
General Motors idled nearly all of its North America plants starting Monday, with the closures expected to last one to two weeks. “These most recent scheduling adjustments are being driven by the continued parts shortages caused by semiconductor supply constraints from international markets experiencing COVID 19-related restrictions,” GM said in a statement. Late last month, shortages of semiconductors and other parts grew so acute that Toyota felt compelled to announce it would slash production by at least 40% in Japan and North America for two months. The cuts meant a reduction of 360,000 vehicles worldwide in September. Toyota, which largely avoided sporadic factory closures that have plagued rivals this year, now foresees production losses into October. Nissan, which had announced in mid-August that chip shortages would force it to close its immense factory in Smyrna, Tennessee, until August 30, now says the closure will last until September 13. Honda dealers are bracing for fewer shipments. “This is a fluid situation that is impacting the entire industry’s global supply chain, and we are adjusting production as necessary,” said Chris Abbruzzese, a Honda spokesman. And Tesla CEO Elon Musk told investors in July that the supply of chips — the slowest part of Tesla’s supply chain — would dictate the production of its electric vehicles for the rest of the year. “The chip supply is fundamentally the governing factor on our output,” he said. “It is difficult for us to see how long this will last.”
No discounts
With consumer demand for wheels still high, automakers feel little pressure to discount their vehicles. Forced to conserve their scarce computer chips, the automakers have routed them to higher-priced models — pickup trucks and large SUVs, for example — thereby driving up their average prices. The roots of the computer chip shortage bedeviling auto and other industries stem from the eruption of the pandemic early last year. U.S. automakers had to shut factories for eight weeks to help stop the virus from spreading. Some parts companies canceled orders for semiconductors. At the same time, with tens of millions of people hunkered down at home, demand for laptops, tablets and gaming consoles skyrocketed. As auto production resumed, consumer demand for cars remained strong. But chip makers had shifted production to consumer goods, creating a shortage of weather-resistant automotive-grade chips. As of this date, September 23, 2021, there is no relief.
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