What’s the Deal with the Chip Shortage?

It is no secret that in these current times of economic uncertainty, there is a strain on the supply chain of most goods and services. The most drastic of these industries to be affected is the car market. If you turn on any news channel or listen to any current events podcast, you’ll hear the words, “chip shortage.” So, what is a “chip” and why is there a shortage of them? No, we aren’t talking about Doritos here.

These chips are essentially tiny transistors made primarily from silicon, a chemical element and semiconductor found in most of the minerals on the Earth’s surface. These chips in question also allow computers, smartphones, video game consoles, and home appliances to function properly. Since modern vehicles are so advanced and feature so much technology to enhance the interior functions and driving characteristics, new vehicles require a large number of these chips. For reference, the average modern vehicle uses between 50 and 150 chips, while an electric car can use up to 3,000.

When the COVID-19 pandemic hit, it increased demand for personal electronics and because of that increased demand, the production could not keep up with demand. This is why it’s still so hard to get a PlayStation 5. In March of 2020, everyone was uncertain of the coming months so vehicle production halted. The automakers, who have experienced previous recessions, quickly canceled orders for parts with computer chips, thinking auto sales would take a nosedive, according to Michelle Krebs, executive analyst for Autotrader. When automakers offered steep discounts and special financing rates to combat this upcoming recession they thought they were going to face, vehicle sales skyrocketed. People were also receiving stimulus checks and not spending money on going out like they were used to.

Dealerships were selling cars faster than they could order them from the factory and this has snowballed into the shortage of cars we have been facing for most of 2021. Because of the shortage of new vehicles, the prices of near-new used cars have also risen. Thus, making your used car worth a lot more because dealerships cannot get new cars to sell.

We’ve heard that this could last into 2023, but we really have no idea when this shortage will cease. You can always trust that we will do everything we can to take care of you and your vehicle’s needs at Hebert’s Town and Country Chrysler Dodge Jeep Ram in Shreveport, Louisiana. If you have any questions about what your car is worth or want us to order you a new vehicle, contact us and we’ll be happy to help!