The Car Chip Shortage Is As Bad As I Feared

Sep 14, 2021 3 min read
The Car Chip Shortage Is As Bad As I Feared

Everyone, buckle in for this long, bumpy ride…

Unlike some, I don’t like being a prophet of doom and gloom in the auto industry. Back in the summer when market experts were boldly predicting the chip shortage problem would be alleviated no later than in the spring of 2022, I honestly thought they were being overly optimistic. But most people didn’t want to think about what it would mean if the chip shortage stretched beyond that projection. Now, executives from big automakers like Daimler and Volkswagen are sounding the alarm, warning the shortage might stretch well into 2023.

GM has idled almost all North American plants. Find out which are still running here.

I really wanted to be wrong about this and still hope I am. However, the process of making microprocessor chips is far longer than most people realize. That means there’s a big lead-up time for any ramping up efforts for production. Like a bunch of short-sighted fools, automakers and chip producers scaled back as the pandemic struck, like everyone was going to stay home for years on end.

Now we’re in the lurch and it’s gone from bad to worse. Fewer new cars has meant used car prices skyrocketed over the summer, with some used vehicles appreciating in value so much they’re more expensive than on the day they rolled out of the factory. None of this makes sense in a sane world.

What’s even worse is the auto industry is taking few steps to truly correct the problem. Part of the blame is on governments which dogmatically cling to their doctrine of ever-stricter safety, emissions, and fuel efficiency standards. Those regulations have pushed a dramatic rise in the number of onboard technologies packaged into new cars, dramatically inflating prices. With a chip shortage, the sane thing would be to lift at least some of the restrictions, conserving the scarce resources so there’s relief for everyone. But that’s not going to happen.

Then there’s the ever-increasing onboard technologies automakers are voluntarily installing. They blame consumers’ never-ending thirst for all these bells and whistles, claiming people really want all the chip-driven features. Curiously, it’s becoming difficult to find vehicles without all these systems, even though there surely is a portion of the population which would gladly pay less to have fewer onboard technologies in their everyday ride.

Add in the fact electric cars require many, many microchips and it’s easy to see how this situation might not just be about the pandemic and shutdowns it triggered. While not a popular opinion, I’m growing increasingly convinced our fascination with shiny, new technologies in cars will continue to cause production problems, like the shortage of chips.

There are those who are religiously devoted to this tremendous technology push in our cars. Many feel by having more driver-assistance features, fewer vehicle emissions, etc. we’ll magically live in a utopian society. Their end goal sounds suspiciously similar to the fantasies of people who want to ban all personal cars from urban city centers, which echoes the utopian dreams of the Industrialists from about a century ago. History repeats itself.

What does this mean for the rest of us? New car supply is going to remain tight for at least a year, maybe up to two years, with the possibility of it lasting longer than even that. The result will be continued price inflation for used cars, squeezing the lowest-income individuals the most. People will grow tired of the situation and maybe, just maybe there will be enough pressure to walk back some of the regulations forcing automaker to use gross amounts of chips in new cars. But, with industry executives downplaying the ever-lengthening timeline of the shortage and painting a rosy picture of the long-term future, there will be many who resist any big changes like that. Personally, I’d love to see drivers with stick shifts and other low-tech solutions which make them pay attention while they’re behind the wheel again.

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