For Want Of A Chip: Why local dealerships are sitting near empty

By Larry Hightower

For want of a microchip, many things have been lost: jobs, purchasing power, vehicle productivity, sales and tax revenues. Government services and programs have been threatened.

Forbes Magazine blames COVID 19 for the global shortage of microchips, which has rippled across national and international markets. During the pandemic shutdown, purchases of computers, phones and video games zoomed. And when schools transitioned to remote learning, consumer electronics sales spiked even further. 

The auto industry has been hit hard. “A lot of people think in terms of one car, one chip,” says Ray Arriaga, sales manager at Cable Dahmer Chevrolet. “In fact, most cars utilize 75 to 100 chips. Malibu production has been shut down for months. Normally we would have 60 to 80 new cars on our lot. We currently have one unsold new car.” 

R.L. Swanson, general sales manager at State Line Chrysler-Dodge-Jeep, says he began noticing shortages about three months ago. “We currently have about one-fourth our normal inventory of new vehicles. We have a demand for vehicles with sunroofs, but they are extremely hard to get.” Swanson says their inventory of used vehicles is good, but the shortage of new vehicles has dramatically affected trade-in and retail values.

Fully built vehicles sit on factory lots waiting for chips, a situation that has limited shifts or closed auto plants in Kansas City and across the country. The economics of lost wages impacts consumer spending and has tax implications, which in turn threatens government services and programs.  

Vehicle production shortfalls seem to be affecting all makes and models, but U.S brands have been hit hardest. Autoforecast Solutions projects the global semiconductor shortage will pull 1 million vehicles from production in 2021. Of those, 600,000 are expected to be lost to North American production. Automotive News reports that “Ford was the most shell-shocked with 325,000 vehicles lost. Of those, approximately 110,000 units were lost from the popular Ford F-150 pickup.” Other heavily impacted vehicles are the Jeep Cherokee, Chevrolet Equinox and the Ford Explorer.

In 1990 the U.S. produced approximately 37% of microchips. That has shrunk to approximately 12%. In response, the Senate passed a $190 billion legislative package to help American businesses compete more effectively with Chinese technology. Of that amount, $54 billion will go to domestic production of semiconductors. President Biden has voiced support, but the legislation still needs to pass the House of Representatives. 

Is the end in sight? According to AFS vice president of global forecasting, Sam Fiorani, vehicle inventory likely won’t return to full capacity until at least 2022. “We don’t know how deep this is and how soon we’ll recover,” he says.