There’s a shortage of semiconductor microchips, and it’s turning the automotive industry on its head. These chips make up essential hardware that powers anything from your touchscreen radio to your engine control system.
Without this key piece of technology, automakers have been forced to shutter plants, which has led to extraordinary delays when shipping new vehicles. All this translates into smaller inventories on lots around the world, as all manufacturers have been hit equally hard by this shortage.
Why is There a Shortage?
If you want the short answer, blame COVID-19.
For a slightly longer answer, you’ll have to look at how the global pandemic changed the way consumers spent their money. Many people facing job insecurity put unnecessary shopping on the chopping block, so fewer people were in the market for new vehicles as a result.
At the start of the lockdown, car dealerships either closed outright or significantly limited how many in-person customers they could serve at a time. As a result, inventory didn’t move for a large portion of 2020, and once sales picked up in the latter half of the year, car dealerships were slow to restock their inventory.
To save their own bottom line, chip manufacturers pivoted to service the entertainment and gaming industries. As more people stayed at home under lockdown, increasing demand for gaming consoles meant chip suppliers could stay in business. It went so well that they were too busy to meet production demands once the auto industry bounced back in 2021.
To make matters worse for automakers, one of the biggest chip suppliers for the auto industry suffered a fire. The disaster caused such extensive damage that the company couldn’t resume production until mid-April.
What it Means for People in Canada
Automakers in Canada have felt the chip shortage just as acutely as other places in the world. Assembly plants in Oakville, Brampton, Oshawa, and Windsor have halted production for Chrysler, GM, and Ford.
Canadian consumers can expect fewer options as a result, especially when it comes to smaller sedans like Honda Accords and Toyota Corollas. If you do find the make and model you want, you’ll likely pay more for it now than you did pre-pandemic.
Car Dealerships in Toronto Offer an Alternative
Auto experts forecast the impact of these shortages could continue well into 2022. So, anyone looking to add a car in their driveway may be paying more than expected.
If you can swing it, it may be worth waiting to upgrade your vehicle until the auto industry locks down its microchip supply chain. But if you need a car now, consider looking into used auto dealerships. Although the chip shortage has caused the prices of used cars to go up, they’re still less than brand new vehicles off the assembly line.
Depending on where you live, inventories for used vehicles may still be flush. Take, for example, Toronto. The largest used car dealership in Toronto will have more options than any place else in the country, simply because of the population of Toronto.
With 2.8 million people living in the city proper — and another 6.4 million living in the Greater Toronto Area — more people trading-in cars here than in other cities. This could increase your chances of finding a reasonably priced used car despite these shortages.
Bottom Line
It could be a while until automakers right the industry by closing supply chains and replenishing inventories. Until then, expect to pay higher prices for new cars.