Anonymous wrote:The economics of the dealer model has changed. Manufacturers are NOT going to start overproduction that they will need to support financially with “cash on the hood” incentives, and rebates, or holdback, etc. Ford has begun direct sales and Honda is moving in that direction. There will be a sea change in the next five years as ICE vehicles are phased out and EVs become the norm. EVs don’t require the same level of service (oil changes, plugs, ignition coils, fuel injectors, muffler/exhaust, fluids, transmission/dufferential, piston rings, manifold) and this is how must dealerships currently make their profits. This also means fewer mechanics and will affect everything from auto parts stores to your local gas station mechanic.

Anonymous wrote:As for cars, I think the automakers learned an important lesson: decades of chasing volume with endless discounts and sales was not great. In 2021, carmakers found that tight supplies meant much higher prices across the board. Carmakers made amazing profits by selling FEWER cars. Many car dealers had their best (profit) year by selling FEWER cars. I don't see them going back to the good old days any time soon.

Corporations are learning. I feel like I am seeing the exact same supply/demand/price dynamic being played out with airline tickets.

Anonymous wrote:

Anonymous wrote:Chips are mostly made in Asia. Asia had very strict lockdowns during COVID, so that disrupted production.

Demand is waaaaaaay up for chips, since you need them for everything from engines, to in-dash screen infotainment, to your power adjustable seats. Lots of chips in a single car. Automakers are competing TV, cell phone, industrial users, etc for chips.

The US is building new chip factories here to prevent this from happening again. But it will take a few years.

Lockdowns in Korea/Taiwan were not the issue. The issue is that because new auto sales went down in 2020 (partially due to lockdowns in places that assemble cars, partially due to reduced new car demand), the automotive vendors reduced their future reserve capacity on semiconductor production lines. That reserve production capacity has now been contracted to others, and there is a spike in automotive demand. But there is now no semiconductor production capacity for them to buy.

Not a bad explanation from a Toyota dealership: https://www.toyotaofnorthcharlotte.com/research/the-car-chip-shortage-explained/

The COVID-19 pandemic totally messed up forecasting for goods. Back in March of 2020, shutdowns and quarantines kicked off. Automotive manufacturers figured that this would lead to a lower demand for new cars; due to that assumption, they forecasted fewer sales and as such, canceled chip orders. Unfortunately, they were wrong. Demand dropped temporarily, but it bounced right back up… and the car chips weren’t there, which means the car chip shortage began.

Anonymous wrote:Chips are mostly made in Asia. Asia had very strict lockdowns during COVID, so that disrupted production.

Demand is waaaaaaay up for chips, since you need them for everything from engines, to in-dash screen infotainment, to your power adjustable seats. Lots of chips in a single car. Automakers are competing TV, cell phone, industrial users, etc for chips.

The US is building new chip factories here to prevent this from happening again. But it will take a few years.

The COVID-19 pandemic totally messed up forecasting for goods. Back in March of 2020, shutdowns and quarantines kicked off. Automotive manufacturers figured that this would lead to a lower demand for new cars; due to that assumption, they forecasted fewer sales and as such, canceled chip orders. Unfortunately, they were wrong. Demand dropped temporarily, but it bounced right back up… and the car chips weren’t there, which means the car chip shortage began.