As you well know, microchips are found in virtually everything. In your car, there are computer modules controlling virtually everything, from engine and transmission operation to in-car tech and virtually everything in between. Long gone are the days of cars having “a” computer. Today, they’re everywhere, and interconnected in ways that make them all vital to a car’s fundamental operation.
The microchip is as ubiquitous in modern consumer products as wood is in home construction. But unlike lumber, microchips aren’t merely refined raw material. While many chips (such as those used for computer memory) have numerous applications, that doesn’t mean that all computer chips are created equal. The specialized computers that manage your car’s powertrain components, infotainment and onboard safety systems can’t simply be swapped out for whatever’s available.
New cars are getting more expensive thanks to the global semiconductor shortage. And the price of used cars is going up, too.
About 13 percent of people who bought a new car in the US in April paid above sticker price, according to Jessica Caldwell, director of insights at Edmunds. Last year, only 8 percent of buyers paid more.
New vehicle prices have been on the rise for a while now, but the shortage is only worsening the trend. Automakers are temporarily shutting down production lines around the world. The chips they are able to source are going into the most popular new vehicles the ones that make the most money. To make matters worse, demand for new cars and trucks is increasing, leading to markups. This has pushed more consumers to the used vehicle market, which is… driving up prices there, too.
General Motors said this week that its new full-size trucks cost 10 percent more than they did last year, and its full-size SUVs cost more than 20 percent more. Ford’s new vehicles shot up in price by $1,900 more than the average industry increase in 2019. But overall sales are way up.
“Prices are just soaring,” Caldwell says. “And as high as the prices go, it seems like it doesn’t really deter people.”
Prices will likely keep climbing as the chip shortage keeps thinning supply. Automakers like Ford and Volkswagen have said they expect to take an even worse hit to production this quarter. Ford will only make half as many cars as it originally expected, the company said this week during its quarterly investor call. “We are, for sure, in crisis mode,” Volkswagen boss Herbert Diess said about the next few months.
The chip shortage has exacerbated many of these pricing trends, but it may have temporarily reversed one that previously seemed irreversible. According to data compiled by Ward’s Intelligence, sedans actually picked up a few percentage points of overall market share in the US in April. Karl Brauer, executive analyst at iSeeCars.com, tells The Verge his team sees the same thing. That could mean some buyers are considering a much different middle-ground option between fighting to buy the new trucks and SUVs that are in demand and scouring the used market: settling for a smaller, more traditional new car.
While that trend would be better for pedestrian safety and greenhouse gas emissions in the long run, it’s not likely to stick. US automakers have all but abandoned sedans, and even the foreign automakers who’ve been happy to fill that vacuum for the last few years are also focusing more on pickup trucks and SUVs. Long term, Krebs says, consumers are just willing to pay more for bigger, more well-equipped vehicles.
“The one thing they are not willing to do, they will not go from a sport utility vehicle to a car,” she says. “That is just dead on arrival.”
