Semiconductor shortages a headwind for new car prices

While car prices down under have remained relatively competitive in recent years as the industry faces heightened competition and subdued consumer demand, a new issue has emerged that has the potential to keep a cap on those aggressive prices. And that relates to a shortage in semiconductors. The dynamic could even lead to higher prices, as a supply-demand imbalance catches numerous parties off guard.

Semiconductors - why are they important?

Amid the impact of COVID-19, many manufacturers have been facing difficulties sourcing semiconductors as a shortage emerges across the industry. These components are vital in the car manufacturing process, used in everything from the latest state-of-the-art safety technology, right through to your dashboard and infotainment system.

In fact, many drivers are probably unaware of this, but today's latest cars use a small army of microchips and semiconductors to help realise incredible results. Most of the new cars released in the last couple years use as many as 200 chips, whereas for hybrid and electric vehicles, this number is significantly greater, estimated at more than 3000 semiconductors.

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What impact is this having right now?

The result of this critical part shortage is - you guessed it - delays. If you've been visiting dealerships lately, and heard wind that they have no stock for the car model you're interested in, this very well could be one of the reasons why. It is worth noting that logistical bottlenecks have also proven to be another barrier.

Nonetheless, delays arising from semiconductor shortages have reportedly spanned as long as 12 months, although for the majority of cars that appeal to your 'average' new car buyer, the delays are in the vicinity of a few weeks or a few months. Even then, that could be enough to put some drivers off buying a certain car.

Not helping the cause is the better-than-expected recovery in the new car market. Australia's new car industry was in a downtrend for 31 months before, finally, the months of November and December 2020 saw the first year-on-year growth in sales numbers.

All of this means that manufacturers of microchips have been caught out by the unexpected demand stemming from the car industry, all the while already having struggled to cope with the meteoric rise in demand for electronic goods as more people have been required to work from or stay at home.

Next time you step into a dealership, keep in mind that manufacturers might be in a tight spot waiting for stock to arrive, held up in manufacturing due to the shortage of semiconductors. That could leave you with less scope to negotiate right this minute, especially if someone else is prepared to pay top dollar, although this will of course vary from one brand to the next. 

 

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