New Car Sales & Chip Shortages

It is no secret that any buyer in the market for a new car is having a hard time getting the exact vehicle they want right now. Car dealers, financially impacted as inventory has declined though demand has increased, are tacking on extra charges so higher sticker prices have become the new normal. Car dealers and manufacturers are advertising “build to order” vehicles as well, the lead time for a new vehicle can be from 4 to 12 weeks depending upon whether the car is manufactured in the United States or abroad.

The decrease in production of vehicles, fueled by a shortage of semiconductor chips used by manufacturers for new vehicles, is the the root cause of the problem. What started during the pandemic continues to be a problem in the production of new vehicles. The microchips are the brains of most vehicles, like tiny computers GM issued a letter to their dealerships regarding the outrageous mark-ups on vehicles. GM ended the letter with a warning to dealers “that if any unscrupulous practices were to be brought to the attention of its brand, action would be taken.”

The war in Ukraine has impacted some manufacturers more than others. Volkswagen and BMW with many of their parts suppliers in the Ukraine have advised that they are reducing new car production in Europe. The two auto manufacturers have also stated that the auto supply chain is wreaking havoc on a new car sales market that was already suffering due to the semiconductor chip shortage.  Many dealers are presenting older model CPO (certified, pre-owned) vehicles in their showrooms, rather than 2021 or 2022 models.

GM and Ford Selling Some New Cars Without Chips

In an effort to satisfy the growing demand for new car sales, Ford and GM are building some models of their new vehicles “chip-less”, meaning without the semiconductor chip that is in short supply. It has been reported to dealers that Ford is building selling new Explorers without computer chips installed but under the stipulation they will install the chip within a year. The chips control up to around 3,000 different functions in an automobile from airbag deployment, heating seats, to parking cameras and navigation systems. The car still works without some of these functions, but the luxury many expect when they buy an upgrade may be affected.

Automobile manufacturing is not the only industry that uses chips, overall, only about 5% of total chip production is allocated to the auto industry for new car sales. The remainder are used for smartphones, televisions, gaming consoles and other consumer electronics.The demand for those products during the pandemic for in-home use grew exponentially and chipmakers have still not caught up.

If you buy a new vehicle and the vehicle has been back to the dealership 3 or more times, contact our lemon law office for a free case review.

 

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