The car industry supply chain problem has been brutal for manufacturers, dealers, and buyers over the course of the last year. Some manufacturers have had to idle assembly lines, a number of dealer lots are nearly empty and the lack of supply has pushed car prices to nosebleed levels.
Among the reasons for the shortages is that cars have become more complex. Infotainment, safety systems, and navigation software each require recently invented technology. These require cars to be built like computers on wheels. The car companies continue to push these features, and often charge large sums for them. Ironically, car quality surveys find that many drivers are disappointed because they hurt reliability.
People have decided to hold on to old cars as the prices of new and slightly used ones rise. The average age of a car on American roads is over 12 years, which is a record. Drivers can do this, to some extent, because the quality of vehicles improved over a decade ago.
GM reported the most recent example of how massive the supply chain problem is. It has 95,000 cars partially built waiting to be completed. It reported as part of its earnings announcement that “GM will hold about 95,000 vehicles manufactured without certain components in company inventory until they are completed and will recognize revenue when they are sold to dealers, which is expected to happen throughout the second half of 2022.”
GM also announced that sales fell 15% in the quarter.
No one in the car industry believes that the shortage of chips will end this year. This begs the question of whether car sales will recover at all in 2022 or early 2023. And, it also raises the issue of whether some people will get the new cars they want at all.
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