Inventory Affecting Car Prices In CA | My Car Auction
How Long Will Inventory at Dealerships Be Low?

Currently, car prices are on a hike, demand is high, and supply is at a record low. The used car market is experiencing an all-time high, with some prices hitting 42 percent and above after the pandemic. If you're concerned about the high prices of vehicles or wondering how long inventory at dealerships will be low? Here's what you should know:

Inventory at dealerships will probably not be back to normal levels until late 2023 at the earliest. Why? Because the automobile industry is still recovering from the impacts of covid-19 that led to the shortage of chips amongst manufacturers.

During the pandemic, many automakers reduced their production capacities as demand dropped. However, consumer IT companies and electronics manufacturers increased their production quota as more and more consumers bought their products.

Unfortunately, the increase in demand for consumer products led chip manufacturers to shift supply from the automobile industry to the electronics and IT industry. As a result, inventory at the dealership became low, and car prices skyrocketed.

While you're planning to acquire a new ride, this article will guide you on vital things to know about low inventory, cars affected, and how long the chip shortage will last. Read on!

Causes of Low Inventories

As earlier mentioned, the chip shortage is the primary cause of low inventory at dealerships. However, beyond that, there are other contributing factors.

In March 2021, a major computer chip supplier in Japan caught fire. This company, Renesas Electronics Corp, lost 600 square meters of its plant area to fire, with over 20 machines destroyed. Because of the unfortunate event, the shortage of chips was further compounded, given that Renesas supplies nearly 30 percent of chips needed for manufacturing new cars.

In addition to this, extreme weather conditions in Texas made matters worse. Texas' cold weather conditions brought about blackouts and a power crisis that led major production locations to shut down. More storms hindered shipping and delivery routes, making it difficult to supply chips to automakers on time.

With these issues, major car dealerships and automakers struggle to meet vehicle demands. The question right now is, “how long will this shortage last?”

How Long Will Chip Shortage Last for Cars?

According to analysts, the shortage is expected to last till 2023 before snapping back to normal. While there may be slight improvements during the third and fourth quarter of 2022, Autonews predict shortages will continue to plummet till late 2023.

For car shoppers, this forecast means inventory shortages will continue to soar, together with car prices. Even though the market may see some improvements, that is unlikely to happen soon.

Cars Affected by Chip Shortage

Generally, every automobile manufacturing company is affected by the current chip shortage crisis. Many vehicles won't be produced this year. For example, Ford Bronco Sport, Mercedes Benz C-class, Mitsubishi, and Nissan are shutting down major plants and reducing production.

According to Autonews, Nissan has shut down the production of its major models, particularly the Maxima and Rogue. Nissan CEO told CNBC that Nissan will produce half a million less cars this year.

Coming to Mitsubishi, Bloomberg reports that the brand has reduced production globally by 16,000 units. While it is unclear which models are affected, domestic production of vehicles is down by one-fifth of its total turnover, says a Mitsubishi's spokesperson.

Furthermore, Ford and Mercedes have paused productions too. Mercedes won't be producing a C-class model anytime soon, and Ford has already shut down four of its plants.

Bottom Line

With the current predictions about inventory shortages, it is clear production isn't returning to normal anytime soon. Nevertheless, if you still plan to purchase a new car right now, here's what you can do:

First, exercise patience and wait for inventory to rebound. Alternatively, you can check your local dealer and find out what discounts and incentives are available. Although the incentives may be few, you can still find some good options.

More importantly, be willing to try other car brands and models different from your choice.