Will the car business improve in 2023? Will the price of vehicles go down or remain at an all-time high? Will there be more inventory? These are the questions on many car buyer’s minds. Here’s the answer you don’t want to hear: “No.” Here’s why…

Inflation continues to pummel the economy. The supply chain crisis is still plaguing the industry. And according to Investor’s Business Daily, chip shortages are likely to persist through 2023. The ongoing shortage of inventory and high demand means higher prices for new vehicles.

“Shortages of automotive semiconductors will likely remain through at least the year 2023,” Bill Jewell, an analyst at Semiconductor Intelligence, said. “Although a few automakers indicate they are back at full production, most report continuing shortages. The shortages will prevent automakers from producing enough vehicles to meet demand in 2022 and 2023, resulting in continued high prices for most vehicles.”

Mercedes-Benz, BMW, and Volvo report that there are no significant supply issues related to automotive chips. Nissan says they will recover in the next few months. Hyundai and Volkswagen say chip shortages are easing.

Other car makers continue to face chip shortages. Honda says its production outlook is uncertain due to shortages. Ford and Toyota say chip shortages are still an issue and General Motors expects the shortage to last into 2023.

Why Chip Shortages Continue to Plague the Car Industry

Semiconductor Intelligence says the key reasons for the shortages of automotive semiconductors are:

  • Automotive manufacturers cut back on semiconductor orders at the beginning of the COVID-19 pandemic. Auto companies didn’t want to be stuck with excess inventory if demand fell due to the pandemic. When automakers tried to increase orders, they lost their place in line and were behind other industries such as PCs and smartphones.
  • Many automakers use a just-in-time ordering system to avoid excess inventories. This left them with almost no buffer inventories. And many semiconductors used in automotive are bought by the companies supplying the systems like engine controls and dashboard electronics, rather than the automakers, leading to a more complex supply chain.
  • Semiconductors used in automobiles have a long design-in cycle and must be qualification standards. That made it difficult for automakers to change suppliers in the short term.

There’s no way around it. It’s going to cost you more for a new car, truck, or SUV in 2023. The average new car price is now above the $48,000 mark and creeping toward $50,000, according to Money.com. Here are the average MSRPs for a few car makers:

  • Stellantis (Chrysler, Dodge, Jeep, Ram) $54,880
  • Volkswagen $54,858
  • Ford $54,227
  • General Motors $52,175

Is there a light at the end of the tunnel? No light but maybe a glimmer. “What goes up must go down” does not apply to the car business. New vehicle prices will remain high, and recovery will be slow in 2023. Car manufacturers will have to increase rebates and incentives in order to stay profitable.

The best advice for car buyers? Keep searching for deals or lower your expectations and look for a pre-owned vehicle. Or check out Edmunds.com for current manufacturer incentives.

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