Semiconductors Supply Shortage to Further Car Prices Hike Amid Inflation in US - Report

Last year, the US faced inflation rates unseen in several decades, as the CPI jumped 6.8% on a year-on-year basis, according to the latest index compiled in December. The White House blamed the price increases on supply-chain bottlenecks and other pandemic-related economic disruptions, while Republicans pointed at Biden's huge spending agenda.

Car prices could stay high for another two years owing to a lack of Chinese-made semiconductor chips, which is causing dealerships to struggle to maintain their inventory of used and new cars, Fox News reported Wednesday.

Citing Florida car dealers, the outlet noted that the sellers "have to charge more money for the cars because we're paying more money for the cars," and the overall prices have risen because the supply of new products is restricted.

According to the latest Consumer Price Index, the cost of used automobiles and trucks increased by 31.4% over the previous year, while the cost of new vehicles increased by 11.1%.

According to the report, vehicle dealers predict that costs will remain high for the next one to two years.

"Customers come and see less now and have to pay a bit more," Diamond Cut Autos sales consultant Alexis Alvarez told the outlet. "For example, now you get a car that's 2010, and it might just cost you like four or five grand more."

Car dealers told the outlet that a shortage of Chinese-made semiconductor chips is partly to blame for the rise in automobile pricing.

"We get chips made in China for new cars, and they haven't been getting made. Therefore, all the new cars aren't coming, bringing up the price on the old cars," Alvarez said.

Another salesman added that "the problem behind it is unavailability of new cars because of the chips."

"We normally would have 125 new vehicles on a lot. We have about 50, which is more than most car dealers have at this particular time," he said.

Earlier it was reported that in November, the latest month with CPI data available, the average transaction price (ATP) for new cars reached an all-time high of $46,320, marking the eighth consecutive month with a new high.

And according to Kelly Blue Book, the value is up 13.2% from November 2020, when it was $40,937. The continued consumer move from cars to SUVs and trucks has helped push up the ATP, but sales are down due to a lack of supply, which has lowered incentives, the portal estimated.

Automobiles accounted for only 21.7% of November sales, down from over 30% in the same month last year, whereas subcompact cars showed 16.7% growth.

The current chip shortage is caused not only by the disruption of chains due to the ongoing pandemic, but also by the difficult state of trade and political relations between the major players, the US and China, whose production is equally heavily dependent on the manufacturing of these very chips, most of which is concentrated in Taiwan.

As of early last year, Taiwan provided 63% of the whole global semiconductor market, securing the island's place as a major supplier for both China and the US.

China, Japan, the EU, and the US are reportedly attempting to reduce their reliance on Taiwan for semiconductors by encouraging private companies to enhance domestic production with more units. Taiwanese companies have been encouraged to build up production facilities in the United States by Washington, while Chinese companies have been encouraged by Beijing to expand their manufacturing capacity.