We’ve done lots of reporting about how parts shortages, particularly semi-conductor chips, and the coronavirus pandemic have been reducing the number of new cars being built. As a result, there are fewer cars from which to choose on dealer lots, prices for those you can find are much higher, and as a major side effect, used car prices have skyrocketed. All of that has to do with the plight of car buyers, but the automotive industry’s parts shortages and subsequent inability to build as many cars will have ripple effects throughout the economy.
Those ripple effects were detailed today by The New York Times in “How Car Shortages Are Putting the World’s Economy at Risk.” It’s an insightful, recommended read.
Here are some key excerpts:
- “For every car or truck that does not roll off an assembly line in Detroit, Stuttgart or Shanghai, jobs are in jeopardy. They may be miners digging ore for steel in Finland, workers molding tires in Thailand, or Volkswagen employees in Slovakia installing instrument panels in sport utility vehicles … The auto industry accounts for about 3 percent of global economic output, and in carmaking countries like Germany, Mexico, Japan or South Korea, or states like Michigan, the percentage is much higher.”
“The pain is falling hardest on workers and anyone in need of an affordable car. Auto companies have been allocating scarce chips to high-end and other vehicles that generate the most profit, leading to long waits for less expensive vehicles. Used car prices are skyrocketing because of the lack of new cars.”
“It’s difficult to calculate just how much auto industry problems will spread to the rest of the economy, but there is little doubt that the impact is enormous because so many other industries depend on carmakers. Auto manufacturers are big consumers of steel and plastic, and they support vast supplier networks as well as restaurants and grocery stores that feed autoworkers.”
“Semiconductors are not the only components in short supply. Carmakers are also scrounging for the type of plastic used to hold windshield wiper fluid and mold the dashboard as well as the foam used to construct seats, said Dan Hearsch, managing director in the Detroit office of global consulting firm AlixPartners. Because there is a shortage of a tiny bracket used in S.U.V.s, Mr. Hearsch said, the amount of time it takes to fix a vehicle damaged in a crash has shot up to nearly 20 days, from 12.”
There are far more insights in The New York Times piece itself that are worth a read.