I-Team 8

Shortage of chips, labor still throttling vehicle production in US

INDIANAPOLIS (WISH) — The chip shortage is continuing and, an expert told I-Team 8, the supply will probably not meet demand by the end of 2022 or even early 2023.

When supply does catch up, the prices of cars won’t necessarily drop.

General Motors has made strides in getting chips for the thousands of trucks stored in Kokomo. The company says it’s in the process of delivering more vehicles.

Doug Betts is the president of the automotive division for J.D. Powers, a marketing research firm that analyzes consumer data. He says GM’s effort is a good sign.

“My perception is that GM has managed to sort of capture a lot of chips and, you know, tried to catch up on some of these vehicles that have been in storage for lack of some part,” Betts said.

In the autumn, GM packed a Kokomo parking lot with thousands of trucks missing semiconductor chips. The trucks were manufactured in Fort Wayne and then returned to the factory when chips becomes available. General Motors produced electronics, including chips, at a plant in Kokomo before it transitioned to produce ventilators during the COVID-19 pandemic.

Kokomo Mayor Tyler Moore believes GM can do more.

“We have already proven ourselves as a community and GM as a facility,” the Republican mayor said.  

Last week, I-Team 8 noticed a marked decrease in the number of trucks waiting to be finished. It is not a harbinger that the chip supply is meeting demand.  

Betts said, “They’re just getting the vehicles close to the customer. I don’t think they are delivering them without parts. I think they’re shipping them closer so that all they have to do is ship the parts to the dealer, install it and it is out to the customer.” 

The J.C. Powers leader says, in a good year, 17 million new vehicles are sold in the United States. About 3 million fleet vehicles are bought by rental car companies and companies that provide vehicles to employees. The tight supply has kept companies from renewing their fleets. When the supply improves fleet owners are expected to be at the front of the line.

“So, I think there is still going to be tight supply, even after production comes back, for quite a while because you have to caught up all of those cars that were not sold,” Betts said.

As for price, many new cars and trucks are selling at four to five thousand dollars over list price. Many of them paid for with loans 

“Because now, cars are going will be plentiful — let’s hope — in three or four years. They are going to be, if you are familiar with the term, “upside down,” and they owe more on the car than what it’s worth,” Betts said. 

The chip shortage is just one issue plaquing the auto industry. The national labor shortage has forced auto-parts suppliers to cut production, which has led to further delays in new production of vehicles.