ALLENDALE, me. – A recent reportAn organization in West Michigan discovered frustrations growing in the auto industry due to a continuous shortage of computer chips.
In its September 2021 edition, the Institute for Supply Management–Greater Grand Rapids (ISM-GRR) wrote that there is “no end in sight” in the nationwide crisis impacting automotive customers, dealers and manufacturers.
Forecasters think the shortage could continue for at least another 12 months, 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, stated that they have reached a point in which supply is scarce and that they must pay the price. “This has happened in many crises. It was not so many years ago that I stood in line to get gas. We were forced to pay the price, even though it seemed ridiculous. However, this crisis eventually resolved itself. This, I fear, will be the case.
Computer chips are required to drive new cars. But, Long explains, much of the production of cars is outsourced overseas. This led to problems during the COVID-19 pandemic.
When auto sales declined in the first week of March 2020, for example, automakers reduced orders for computer chip and other parts. Companies could not adjust when sales recovered faster because the supply of chips was already available to other customers.
Long stated, “You are expected to know all aspects of your supply chain and all the risks associated with it.”
Toyota Grand Rapids stated that they have only five to six cars left in stock, down from 100 since spring.
Joe Adams, Toyota of Grand Rapids’ general manager, stated that the showroom orders directly at the factory to better meet customers’ needs. It can take anywhere from two to four months for cars to arrive. He claims that the MSRP of a car is not an important factor in determining the cost.
Adams says that the chip shortage led to a demand for used cars. He estimates that they have 180 used cars. He estimates that there were about 120 cars on the lot before the pandemic. The prices of the vehicles are now higher than normal.
Adams stated that Adams does his best to ensure guests receive the same treatment. “It is an ever-adapting situation.”
ISMGRR reports that the September seasonally adjusted sale rate (SAAR), fell to 12.1million units, compared to the April SAAR, which was 18.5 million. The third quarter saw a 12.9% drop in light vehicle sales.
Long thinks rolling layoffs at West Michigan auto parts producers may be possible. But the loss in growth is what worries Long. It has been the driving force behind much of the region’s recent growth in the last decade.
The lack of computer chips means that manufacturers will continue to wait for more supply.
Long said that “We have identified a few West Michigan suppliers that can go toe to toe in the international market for automotive components, and they were projected growing, but now they’re going be banned from growing.” “I believe we’re going to bring a lot of chip manufacturing back to this country, and I think you’re also going to see some industries, like automotive, go out and identify a company — a small company possibly. They will buy it and all production will go to that company.
Long suggests that for the moment, the only way to solve the supply chain issues is to continue riding the wave.
Marisa Oberle originally published this story on Scripps station WXMIGrand Rapids Michigan