Have trouble getting your hands on a new Ford F-150?
The dealer’s been promising you a new Honda CRV but it’s still “in transit?”
Welcome to the car business in 2022. A litany of problems continues to plague the $82 billion industry. Post pandemic demands for new inventory, bottlenecks at ports and loading docks, a dire need for truck drivers, and a shortage of microchips (also known as semiconductors) have delayed vehicle shipments, forced plants to shut down, and caused car prices to skyrocket. There doesn’t seem to be an end to the microchip shortage. How could something so tiny wreak so much havoc?
It all started with COVID-19. As lockdowns were put in place in the U.S. and overseas, microchip production slowed, and factories – many in Asia – shut down. And with the economic recovery, the demand for vehicles increased. So did electronic products that use microchips. The problem got worse, and the supply chain buckled.
A supply chain is defined as a system of people, information, and resources involved in supplying a product or service to a consumer. When a supply chain Crisis is broken or crimped, it creates a domino effect and impacts every part of the system. Because an automotive supply chain has such a vast and complex network of global suppliers, it takes time to correct and get back to normal again.
Ford found a simple solution to their chip shortage by partnering with GlobalFoundries, a U.S.-based chipmaker. With this alliance, the two companies will work together to make microchips for Ford vehicles.
One silver lining is that new car buyers will be getting a lot more for their trade-ins. Used-car values are soaring, demand is at an all-time high and your trade-in is worth more than ever before. This will not help if you’re buying a preowned car, but if you can find the new car you want, you will be getting much more for your current vehicle.
Will supply chains survive global disruptions, pandemics, natural disasters, or manmade conflicts in the future? The toll COVID has taken on every aspect of life has been devastating, and it was a wake-up call for the car business. Many companies are considering regionalization — moving operations closer to customers – and are hiring more logistics experts. The chain is broken now, but with better data, better logistics, faster connections to suppliers, and more collaboration with networks, it can be repaired. Hopping this supply chain crisis will end soon.