Why is there such a long delay on new vehicles? - Anglo Scottish Finance

Why is there such a long delay on new vehicles?

27th January 2022

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If you’ve recently ordered or have looked to order a new car or van, you’ll probably have been surprised to learn just how long the current lead time is.

New vehicles are now taking months to be delivered, but why is that?

What is causing the delay?

Simply put, there is a current global shortage of microchips.

Every electronic device – including mobile phones, manufacturing equipment, children’s toys and of course cars – use microchips in their electronic circuitry. The microchips themselves, contain small circuits that control different functions, such as engine management systems, parking sensors, and your stereo system.

The shortages of these microchips have reduced the manufacturing capacity of car builders, and at points, shut down manufacture altogether.

Why is there a shortage of microchips?

Unfortunately, there are several reasons for the shortages, with the most obvious one being, the coronavirus pandemic.

The virus has caused the production of new microchips to be slowed down as manufacturers struggle with staff absences and supply-chain issues.

Additionally, as the world was isolating, the demand for personal electronic devices like phones, laptops, and gaming consoles increased enormously, putting pressure on the stock levels of microchips.

During the global lockdowns, new vehicle sales dropped and manufacturers of microchips prioritised their orders for the personal devices that were in high demand.

In addition to the problems caused by the coronavirus, there have also been supply-chain issues caused by environmental and operational issues.

Renesas Electronics Corporation’s factory in Hitachinaka, Ibaraki Prefecture, suffered a large fire that stopped production.

Texas recently suffered one of the coldest winters in its history, with power outages, treacherous driving conditions, and supply issues that forced the closure of Samsung and NXP’s factories to be shut down for the duration of the storm.

Taiwan has suffered changing weather, including a drought which caused the Taiwanese government to cut water to the microchip manufacturing plant in order to maintain the water supply to vital industries and homes.

How long will the shortage last?

Realistically, the delay could last through the rest of 2022.

There is good news on the horizon, a number of contingency plans have been put in place, which is improving the situation.

Some vehicle manufacturers have decided to bring their microchip production in-house so that they are not reliant on others, but as this isn’t their area of expertise, the progress is fairly slow.

Microchip manufactures are investing in new factories. Intel has committed to huge investments in new chip factories that could help with shortages, and chip makers in Taiwan are increasing production to meet the shortfall.

So, while production may still be a little so now, if you’re looking to purchase a new vehicle in the New Year, then now is the perfect time to starlooking. Alternatively, you could make use of our vehicle sourcing team and let us find you your next new car.

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