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Ongoing chip shortage shakes up car buying with fewer choices, higher prices and big profits for some dealers

Robert Channick, Chicago Tribune on

Published in Automotive News

The semiconductor shortage has disrupted the auto industry throughout 2021, halting production, reducing inventory and raising prices, a formula that has left some frustrated buyers searching for any tires to kick.

For some Chicago-area dealers, the scarcity of new cars has made for a surprisingly good year, as demand outstrips supply, and profits soar.

“The nice thing is that we’re selling cars before they hit ground,” said Greg Mauro, 61, owner of Gregory Auto Group, which has three dealerships in the northern suburbs of Chicago, including Hyundai, Mitsubishi and Infiniti. “We’ve had people literally follow transport trucks to our locations and say ‘I want that 2022 Tucson on the truck, and I hope it’s not spoken for.’ It’s kind of crazy, but we try to make it work.”

The auto industry seemed to be recovering after surviving plant shutdowns at the onset of the pandemic in 2020. But a dearth of semiconductors, which control everything from collision-avoidance sensors to infotainment systems, has stalled auto production again this year, with plants shutting down for weeks, and in some cases, months at a time, for want of the crucial chips.

The pandemic-driven global supply chain crisis has created a growing list of shortages, from fast-food containers to stuffed animals. Semiconductors are among the tiniest links in the chain, but the fallout from the chip shortage has been enormous, curtailing technically advanced products such as smartphones, home appliances and automobiles.

“Nowhere is this more acute, our supply chain problems, than in the semiconductor industry,” Commerce Secretary Gina Raimondo told the Economic Club of Chicago earlier this month.

 

Congress is weighing a measure to allocate $52 billion to boost semiconductor manufacturing in the U.S., the birthplace of an industry that has since migrated primarily to Taiwan. It can’t come soon enough for the auto industry, which is projected to produce 7.7 million fewer vehicles and lose $210 billion in revenues globally this year due to the semiconductor shortage, according to consulting firm AlixPartners.

New vehicle sales in the U.S. declined precipitously in 2020 as production ground to a halt at the start of the COVID-19 pandemic, dropping from about 17 million vehicles the previous year to 14.6 million — the lowest total since 2012, according to car shopping website Edmunds.

Edmunds is projecting about 15 million new vehicles will be sold in 2021, a number that was revised downward as the semiconductor shortage persisted throughout the year.

“Consumers still want cars,” said Ivan Drury, senior manager of insights at Edmunds. “They just can’t buy them because of the semiconductor shortage.”

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