ALLENDALE, I. – AN recent reportA West Michigan nonprofit found that the frustrations in the auto industry are mounting due to a persistent shortage in computer chips.
The Institute for Supply Management Greater Grand Rapids (ISMGRR) stated in its September 2021 issue that there is “no ending” to the nationwide crisis facing auto dealers, customers and manufacturers.
Forecasters think the shortage could last at least another year, further limiting consumers’ ability get a new vehicle at the price that they desire.
Brian Long, who was responsible for the analysis and is also the director of supply chains management at Grand Valley State University, said that the supply has reached a critical point and that he had to make a payment. This has happened in many crises. I can still remember waiting in line for gas a few years ago. Even though the price was outrageous, we had to pay it. Fortunately, that crisis has since passed. This will also be true here.”
To drive new cars, you need computer chips. However, Long explains that car production is often outsourced overseas and shared with other industries. This creates problems during the COVID-19 pandemic.
As auto sales dropped in March 2020, automakers reduced orders for computer parts and chips. Companies were unable adapt to sales increases that occurred much faster because chips supplies had already been sold to other customers.
Long stated, “You are expected to know all aspects of your supply chain and all potential risks.”
Grand Rapids Toyota stated that their inventory has grown from 100 to only five or six cars since spring.
Joe Adams, Toyota’s Grand Rapids general manager, said that the showroom orders direct from the factory in order to satisfy customer needs. However, it can take up to four weeks for cars arrive at their destination. He claims that the car’s retail price is always the lowest.
Adams says that used cars have become more in demand due to the chip shortage. He estimates that their lot has 180 used cars. He estimates that there were 120 cars on the lot before the pandemic. However, the vehicle prices were much higher than normal.
Adams stated, “We do our best for our guests to be looked after in the exact same way.” It’s going to change constantly.
According to ISMGRR, September’s Seasonally Adjusted Sales Ratio (SAAR), fell to 12.1 Million Units, down from April’s SAAR (18.5 Million units). The third quarter saw a 12.9% drop in light vehicle sales.
Long claims that there are still layoffs in the western Michigan auto parts industry, but he is concerned about the decline in growth. Much of the region’s recent growth has been driven by industry in the past decade.
Until there are more computer chips, manufacturers will be out of work until they have enough.
Long stated that he had identified some suppliers in Michigan who could do the job in the global automotive parts market. They would grow and are now prohibited from growing. “I believe we’re bringing a lot of chip production back to this nation, and I think that you’re also going see some sectors, such as the auto industry, go outside and identify a business — maybe a small company. They have started buying and all production will be dedicated for that company.