https://apnews.com/article/tec...94623887a71c1fb72f88


Business
US auto sales slump, stalled by car computer chip shortage
By TOM KRISHER
October 1, 2021
FILE - In this Sunday, Sept. 12, 2021, file photo, a pair of unsold 2022 Bolt electric vehicles sit outside a Chevrolet dealership in Englewood, Colo. U.S. new vehicle sales tumbled in September as a global shortage of computer chips worsened, shuttering factories and limiting the selection on dealer lots. (AP Photo/David Zalubowski, File)
FILE - In this Sunday, Sept. 12, 2021, file photo, a pair of unsold 2022 Bolt electric vehicles sit outside a Chevrolet dealership in Englewood, Colo. U.S. new vehicle sales tumbled in September as a global shortage of computer chips worsened, shuttering factories and limiting the selection on dealer lots. (AP Photo/David Zalubowski, File)
DETROIT (AP) — In a normal month before the pandemic, Con Paulos’ Chevy dealership in Jerome, Idaho, sold around 40 new vehicles. In September, it was only six. Now he’s got nothing new in stock, and every car, truck or SUV on order has been sold.

Last month, what happened at his dealership about 115 miles (185 kilometers) southeast of Boise was repeated across the country as factory closures due to a worsening global shortage of computer chips crimped U.S. new vehicle shipments.

U.S. new vehicle sales tumbled about 26% in September as chip shortages and other parts-supply disruptions cut into the selection on dealer lots and raised prices once again to record levels. That sent many frustrated consumers to the sidelines to wait out a shortage that has hobbled the industry since late last year.

Automakers sold just over 1 million vehicles during the month, according to Edmunds.com, a figure that included estimates for Ford and others that didn’t report numbers Friday. September was the lowest sales month of the year, Edmunds said.


For the third quarter, sales were 3.4 million, down 13% from the same period a year ago.

Automakers on Friday reported some pretty poor numbers. General Motors, which only reports sales by quarter, said its deliveries were off nearly 33% from July through September of last year. Stellantis, formerly Fiat Chrysler, saw quarterly sales dip 19%, while Nissan sales were down 10% for the quarter.

Honda’s U.S. sales fell almost 25% last month, and were down 11% for the quarter. At Toyota, sales were off 22% for September but up just over 1% in the third quarter. Hyundai reported sales off 2% last month but up 4% for the third quarter. Volkswagen third-quarter sales were down 8%.

“September results show that there are simply not enough vehicles available to meet consumer demand,” said Thomas King, president of data and analytics at J.D. Power.

The average sales price of a new vehicle hit a record $42,802 last month, breaking the old record of $41,528 set in August, J.D. Power said. The average U.S. price is up nearly 19% from a year ago, when it broke $36,000 for the first time, J.D. Power said. The auto price increases have helped to drive up U.S. inflation.

General Motors, hit hard by temporary plant closures last quarter, expressed some optimism, though. Steve Carlisle, president of GM North America, said the computer chip shortage is improving.

“As we look to the fourth quarter, a steady flow of vehicles held at plants will continue to be released to dealers, we are restarting production at key crossover and car plants, and we look forward to a more stable operating environment through the fall,” he said in a statement.



The shortage and crazy high prices for both new and used vehicles began with the eruption of the pandemic last year, when many states issued stay-at-home orders. Prices plummeted, and automakers shuttered factories for eight weeks. The resulting decline in supply came just as many cooped-up consumers wanted a new or used vehicle to commute to work or to take road trips without coming in contact with others.

While the auto plants were shut down in April and May last year, computer chip makers shifted production to satisfy wild demand for laptops, gaming devices and tablets. That created a shortage of automotive-grade chips, a problem that might not be fully resolved until next year.

Because of the high prices, dealers big and small are reporting record profits, but Paulos fears those days might be over. He’s paying the bills and making money with used car sales, as well as service as people keep their vehicles longer. He’s hoping the new auto shortage has hit bottom and says GM appears to be bringing more factories back online.

“We won’t be having any inventory to show people here,” Paulos says. “If we don’t get some supply to the dealers, the record profits we were making are going to turn into record losses, I’m afraid. It’s hard to sustain yourself with no new flow.”

quote:

Originally posted by photohause:
While the auto plants were shut down in April and May last year, computer chip makers shifted production to satisfy wild demand for laptops, gaming devices and tablets. That created a shortage of automotive-grade chips, a problem that might not be fully resolved until next year.

So they can transition essentially overnight, but it takes many months or a year-plus to transition back?

Bunk.

Not buying it all. Nearly every industry that experienced a surge has operated at record high's (production/units) for the past 12-18 months. This includes firearms, ammo, fitness equipment, bicycles, boats,RV's, etc.

That transition should take weeks - not years.

That system had evolved an equalibrium. The thing that really matters and gets interrupted is the cash that makes it all go. The repercussions of the loss of huge numbers of businesses, the cash flow ends in all those cases as well and the cumulative effect not just to permanently kill those businesses, but many, many supply chains collapse as well.

I don't think it is just the physical act of getting things back on track. And the looming threat of further 'lockdowns' stifles a great deal of potential lending that could have restarted the engines.

This article, like most poorly written and researched news pieces today, fails to identify the rest of the picture. There are huge inventories of incomplete vehicles from all manufacturers stashed all over the country right now. As the economy continues to weaken and inflation increases (what we are seeing daily), what happens when manufacturers can't get rid of that inventory because demand slows with the economy? Manufacturers are already taking a bath on the holding costs of these units, having billions in capital sunk in them they lose money on daily. Just because chips magically appear some day in the future, that doesn't mean those inventories will flow to dealers and onto consumers. There are huge structural issues at play here that could have massive impacts to the economy.

quote:

Originally posted by photohause:
So they can transition essentially overnight, but it takes many months or a year-plus to transition back?

Bunk.

Yeah, exactly. It makes no sense that it can flip one way overnight, and yet it can't flip back just as easily.
I'm guessing the chip makers have a larger profit margin making chips for the electronics industry than for the auto industry.

My understanding is that the chips that come out of the factory today were already spoken for well over a year ago. The average number of chips in a new vehicle today is something like 1,200. It's not as if they're just sitting there waiting on 1 chip to show up and then load the vehicle up on the transport.

Almost everything electronic today has some sort of chip in it, often several. Chip manufacturers are filling orders as fast as they can, but it's not fast enough. Some of these chips can take over 3 months to produce as well, it's not as if they just flip the switch in the factory and they roll off the conveyor in a matter of minutes.

I have been in the automotive business for 35 years. What is happening is for real. Manufacturers would be selling, building and delivering vehicles to dealers if they could. The chip shortage has affected far more than the automotive business as the video game industry has a similar issue. In all my years in the business, I have never seen anything like this and it is costing the manufacturers billions of dollars with last years models stacked up and can't be delivered. I am in dealerships every day and there are many stores with less than 10 new vehicles in stock where they would have 150 plus. All of the manufacturers are taking a beating and it won't end anytime soon. It much like the housing market where everything new and used is sky high. I wish I had the answer but not with this one. My advice is that if you can get a NEW vehicle for MSRP or a bit less it's a good deal. Just don't expect a deal on any used vehicle until this is over.

My wife needed a new car and we went car shopping last month. She was leaning toward a 2022 Explorer but the dealers couldn't get one even for us to look at because of the chip shortage. The dealer told us they were putting the chips in the car long enough to drive them to transport then parking them and pulling the chips out. That ended up being to our advantage because we ended up with a 2022 Volvo that was built in Sweden. It seems the geniuses at Volvo order their auto technology like chips several years out. I always try to buy American but this Volvo is one superb automobile.

I have been in industrial automation for 30+ years, and I've never seen anything like what's going on, ever.

If it's electronic, the probability of an item being "back-ordered" is probably above 50%, and that's the stuff I use on a regular basis. Just to turn around projects, I've been substituting parts like crazy for the last 6 months, but not everything in an integrated system can be subbed...

Don't even get me started on all the labor I've wasted just trying to work around parts availability, it's f'n crazy.

quote:

Originally posted by NapoleonSolo:
I have been in the automotive business for 35 years. What is happening is for real. Manufacturers would be selling, building and delivering vehicles to dealers if they could. The chip shortage has affected far more than the automotive business as the video game industry has a similar issue. In all my years in the business, I have never seen anything like this and it is costing the manufacturers billions of dollars with last years models stacked up and can't be delivered. I am in dealerships every day and there are many stores with less than 10 new vehicles in stock where they would have 150 plus. All of the manufacturers are taking a beating and it won't end anytime soon. It much like the housing market where everything new and used is sky high. I wish I had the answer but not with this one. My advice is that if you can get a NEW vehicle for MSRP or a bit less it's a good deal. Just don't expect a deal on any used vehicle until this is over.

My buddy who had a dealership for over 30 years agrees with you. He is out as of several years ago, but went tooling aorundand there are no products in our area of certain brands. His son in R.I. said his BMW dealership only has series.

"This article, like most poorly written and researched news pieces today, fails to identify the rest of the picture." Big Deal, I totally agree with you on todays journalism...pieces of info and no complete stories...what happened to Who, What, When, How, Where and Why?

From the manufacturing side I can also say this is very real. Plants are idled or slowed all over. Plants making high profit high selling vehicles are down, and that tells you this is very real. Ive been in this business a long time also and I have never seen anything like it either. This isnt slow demand or sales, this is all parts availability.

Its costing a ton of money and screwing a lot of auto manufacturing employees' pay

Personally, I wouldn't mind buying a car without all the computers and automation.

quote:

Originally posted by Gustofer:

quote:

Originally posted by photohause:
While the auto plants were shut down in April and May last year, computer chip makers shifted production to satisfy wild demand for laptops, gaming devices and tablets. That created a shortage of automotive-grade chips, a problem that might not be fully resolved until next year.

So they can transition essentially overnight, but it takes many months or a year-plus to transition back?

Bunk.

Trust me. Selling to the automotive market is tough. They have a set of quality standards which are way beyond what is required for, say, a laptop. There are reliability tests are unique to the automotive industry that can't be done overnight. Certifications have to be reenabled. Some people who quit/retired who specialized in auto reliability have to be replaced/trained/certified.
All this takes time.

Sorry that all you folks that make a living in the auto industry are so negatively impacted by this. I feel a bit selfish for being upset that I can't get the exact new vehicle I want for the price I want while others are worried about having a job next month.

The chickens have come home to roost for the auto industry worshiping at the alter of Just In Time supply chains and shipping production overseas.

quote:

Originally posted by Nuclear:
The chickens have come home to roost for the auto industry worshiping at the alter of Just In Time supply chains and shipping production overseas.

Wouldn't be having any trouble if stupid governments didn't force lockdowns that were known long before to be pointless, and have proven to be pointless over the past two years.

They have no idea how anything really works, no clue how to produce anything of value, and no understanding of basic economics. Admitting there is nothing we can do except take reasonable precautions and hope for the best would have been more honest, but they had to "do something".

quote:

Originally posted by HayesGreener:
My wife needed a new car and we went car shopping last month. She was leaning toward a 2022 Explorer but the dealers couldn't get one even for us to look at because of the chip shortage. The dealer told us they were putting the chips in the car long enough to drive them to transport then parking them and pulling the chips out. That ended up being to our advantage because we ended up with a 2022 Volvo that was built in Sweden. It seems the geniuses at Volvo order their auto technology like chips several years out. I always try to buy American but this Volvo is one superb automobile.

Not knocking Volvo's Chinese ownership, but I wonder if that has any bearing on the component supply, given where much of the world's electronics are made?

quote:

Originally posted by Gustofer:

quote:

Originally posted by photohause:
While the auto plants were shut down in April and May last year, computer chip makers shifted production to satisfy wild demand for laptops, gaming devices and tablets. That created a shortage of automotive-grade chips, a problem that might not be fully resolved until next year.

So they can transition essentially overnight, but it takes many months or a year-plus to transition back?

Bunk.

The initial over night changed wasn’t caused by the chip manufacturers. The auto manufacturers canceled contracts, so the chip manufacturers accepted new contracts from other companies.

The auto manufacturers lost their place in line and have to go to the back of the line. The chip manufacturers could switch back tomorrow, but they have contracts to fulfill from paying customers that didn’t screw them over.

The crazy part is the auto manufacturers are building vehicles that they can’t finish or sell. If I were a chip manufacturer and I saw all these unfinished vehicles, I’d negotiating terms favorable to me.

The shortage started with a fire in a Japanese chip foundry.

https://www.bbc.com/news/technology-56486242

It takes over a year to build a new foundry, and another year to fine tune the plant for optimal chip yield.

I expect another year of chip shortages.