Shortage of microchips causes car prices to increase in MOT

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A global shortage of computer chips means prices are on the rise and some vehicles may be more difficult to find for Connecticut residents looking to purchase a new car.

The average retail price for new Connecticut cars in August 2020 was $ 36,916. Last month it stood at $ 42,252, an increase of almost 14.5%, according to data from Kelley Blue Book.

For used cars, the August 2020 price was $ 22,236 while the August 2021 price was $ 25,316, a 13.9% increase, according to data from Kelley Blue Book.

Prices nationwide have skyrocketed in recent months, said Matt Degen, a publisher of Kelley Blue Book.

“Nothing has really been normal for a year and a half. This is not normal either, the prices are going up as we are seeing, ”Degen said.

Microchip production slowed during the early stages of the COVID-19 pandemic, as some factories closed. And the longer people were isolated, the more electronic devices they bought for work and home schooling. This has resulted in a shortage that is significantly affecting the auto industry, said Jeff Aiosa, director of the Connecticut Auto Retailers Association.

“It really is the catalyst for the shortage,” Aiosa said. “Manufacturers at the height of the pandemic were shut down for an average of two months… Because of this, they stopped placing orders for microchips, and this industry continued to produce but pivoted to strong demand from people who worked remotely or students who learned from home. And this demand has just shifted from our industry to computers, to games. “

Manufacturers use microchips for air conditioning, Bluetooth, GPS, and some security measures, among other features. Most of these chips are made overseas and some factories have closed, Degen added.

It is not known exactly how long the deficit will last, although a major chipmaker said in a recent Kelley Blue Book article that it could take until 2023 to normalize.

“The factories have only limited capacity,” Degen said. “Even though the closures and things go back to last year, it takes a while to catch up. Building a car is not enough to snap your fingers.

But Aiosa is hoping the market will normalize in 2022, with help from the federal government. Some manufacturers make vehicles without chips, which means people can either forgo some functionality that a chip provides, or come back and have a chip installed when available.

General Motors and Ford shut down a few factories in North America for a week and cut production this month due to chip shortages.

The reduction in production means that the big manufacturers are focusing on the most popular vehicles. So buyers who want a new, less popular automobile might have a hard time finding it. And customers may have to compromise on features like vehicle color, Degen said.

Used car prices are also on the rise because, as the cost of buying a new car has increased, more and more people have chosen to search for a used car, experts said and industry professionals.

“We’ve seen a high level of demand, and it hasn’t just been related to the region,” said Andrew Koenigsberg, director of operations at CarHavn, a vehicle sales and repair shop in New Haven.

Lately, more and more customers have come to the store from New York and Massachusetts because they can’t find used vehicles so easily locally, Koenigsberg said.

Several said they were looking for a vehicle before the holidays and chose to take a road trip rather than fly, Koenigsberg added.

“It’s just become a big supply and demand issue where buying vehicles has been very difficult for dealerships overall,” he said of rising prices and rising prices. shortage of electronic chips. “They have become very expensive. “

The good news, Degen said, is that for those who want to sell their cars, the market is good. Used vehicles sell for “really, really good prices”.

The move towards buying used vehicles and the lack of microchips may also cause manufacturers to stop offering incentives “because they will probably sell most of what they have,” said by e- mail Fred Carstensen, professor of finance at the School of Business at the University of Connecticut. Earlier this year, Carstensen worked on a study examining the economic importance of Connecticut auto dealerships.

Aiosa says there has been a drop in incentives from manufacturers as well as a drop in the number of sales nationwide.

For consumers looking to buy a car, Degen advised them to “be patient”.

“If you’re shopping for a car, don’t expect much,” he said. “The price of the sticker on a car is probably what you’re going to pay. There probably won’t be a lot of negotiations.

Aiosa suggested that if consumers are looking to save money and don’t want to sacrifice the “creature comforts” a chip offers, they wait to buy if they can.

“If they are able to wait, that would be my advice,” he said.


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