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The global chip crisis: can we see its end? - Walla! vehicle

2022-08-17T09:42:12.532Z

The production of 12 million vehicles was canceled in 2021 alone, due to the global shortage of chips and spare parts



The global chip crisis: can we see its end?

The production of 12 million vehicles was canceled in 2021 alone, due to the global shortage of chips and spare parts.

How does the shortage affect the car market, can we see the end in sight and what can be done in the meantime to deal with the situation?

In collaboration with Phoenix

08/17/2022

Wednesday, August 17, 2022, 12:45 p.m

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The lack of vehicles leads to an increase in the prices of new vehicles, and the price increases also spill over into the used vehicle market (Photo: ShutterStock)

Every year, hundreds of thousands of new vehicles enter Israel's roads, and over the years the amount of new vehicles entering the road is only increasing.

But if until recently we could go to the showroom or the leasing lot, choose a car and receive it within a few weeks or months at most, we have to get used to a new reality.

A reality where waiting times are getting longer and longer.

And the result?

Customers who ordered a car at the beginning of the year may receive it towards the end of the year.



The drop in the number of deliveries affects the private market, and even more strongly the leasing market: due to the shortage, some importers decided to give priority to the private market at the expense of the leasing market, in a way that leads to the postponement of the vehicle replacement date or to choosing from an existing but more limited selection.



The lack of vehicles leads to an increase in the prices of new vehicles, and the price increases also spill over into the used vehicle market: if before the corona epidemic, second-hand vehicles were often sold at a lower price than the list price, reports from the field show that they are now being sold at a higher price than the list price.



And so while the selection is small and delivery times are lengthening, the prices of new and used vehicles continue to rise.

Why is this happening, and can we see the end in sight?



What is the cause of the lack of vehicles?



The global shortage of cars is largely related to one of the smallest and most important components in a car: the chips.

By virtue of being complex and expensive to manufacture, the production of most of the chips in the world drains into the mouths of two parties: Samsung and TSMC.

The chip market is experiencing pressures that have only intensified following the corona crisis: on the one hand, the closing of factories during the peak periods of the epidemic and the disruptions in question in the supply chain have taken their toll and affected the supply.

On the other hand, social distancing and the nature of the epidemic led to a surge in demand for electronic products, whose activity is based on chips.

The demand for chips is expected to continue to grow, following global trends such as the transition to working from home and the need for massive computing capabilities following the acceleration of the use of artificial intelligence and big data technologies in organizations.



The geopolitical situation also plays a major role in the shortage: the crisis in trade relations between China and the United States has caused Chinese companies to stockpile huge stockpiles of chips, increasing the already great pressure on the boiling chip market.



The shortage in the automotive market: not only the chips are "to blame"



alongside the growing shortage of chips, the automotive industry is also facing a major shortage of spare parts.

This is due to the problems in the supply chain, where the Russia-Ukraine war also contributed.

For example, Ukraine is considered the world's largest producer of wire braids (each vehicle contains wires with an average length of about 5 km), and the war situation in the country caused the closing of factories and the cessation of production. The production of other spare parts, which come from Russia and Ukraine, was also affected.



Global trends led to only to the shortage, but also to the increase in the price of sea transportation by hundreds of percent. This has an effect on the prices of the raw materials from which the parts are made, and as a result also on the prices of the parts themselves. The problem is that the increase in the prices of the parts affects not only the pocket, but creates another front with which we drivers are forced deal with, as we will see in the following lines,



a sharp jump in the volume of vehicle thefts



As the prices of spare parts soar, the motivation of car thieves to act increases.

And the result: according to the Poynter and Ituran companies, there was a sharp increase of 125%-165% in the amount of car thefts in the first quarter of this year, compared to the corresponding quarter last year. As the incentive to commit car thefts increases, the methods for stealing cars become more sophisticated. To illustrate, squads of thieves including officials and the use of advanced technologies such as a cellular jammer (which delays the transmission of the alert to the tracking companies), connecting to the road computer and duplicating the key.



The dramatic increase in the amount of thefts and the increasing chance that our vehicle may be next in line, increase the necessity of car insurance.

And we don't mean compulsory insurance which, as important as it is, is designed to cover bodily injury: we mean car insurance that includes comprehensive insurance, which provides insurance protection in the event of damage to property.

Comprehensive car insurance includes a wide umbrella of coverage, including coverage in case of break-in or theft.

Do you have comprehensive insurance and the car was stolen?

You can receive compensation for the value of the stolen vehicle, in exchange for paying a deductible.

Do you not have comprehensive insurance as part of your car insurance?

If the vehicle is stolen, you will have to finance the purchase of the new vehicle out of your own pocket.



The increase in the amount of theft also leads to an increase in car insurance rates, increasing the need to compare the different policies.

For these reasons, today more than ever it is important to purchase car insurance that also includes comprehensive insurance, not before comparing costs and examining the scope of coverage in each of the alternatives.



A sliver of hope: when will the crisis end?



One of the ways to deal with the severe shortage is through the establishment of new factories for the production of chips.

The major chip manufacturers, Samsung and TSMC, have already announced their intention to increase production capacity: Samsung announced the establishment of a new factory with an investment of 150 billion dollars, while TSMC declared its intention to invest 100 billion dollars in order to upgrade production capabilities.



So it's true, the chip and parts crisis is still here, and it is expected to accompany us at least until the end of 2022. Some sources in the automotive industry even estimate that the shortage may accompany us until 2024. These estimates were made not only by analysts, but also by senior officials in the industry The automobile, in which the CFO of Volkswagen, the largest automobile concern in the world. To these estimates must be added the fact that according to a survey by IFO, the Institute for Economic Research, even if the industry returns to full production, it will take 8 months to complete the backlog of postponed orders.



It is important to remember that the lack of vehicles is the result of a wide variety of factors that combined simultaneously into one widespread phenomenon: disruptions in the supply chain, the increase in demand for chip-based products following the corona virus, the trade crisis between China and the US and the war between Russia and Ukraine. The hopeful return to normality, in the health field , the economic and the geopolitical - is expected to eventually lead to the release of the motor vehicle. We can only hope that soon we will begin to see the end. And in the



meantime: how do we deal with the shortage of cars?



Until the car market returns to full capacity and fills the gaps in demand, car buyers in Israel and around the world are trying to cope with the situation In

several ways:



• Stock-oriented selection - choosing vehicles and new models that are in stock or whose delivery time is shorter.


• Compromise on lower specifications - many buyers who ordered a vehicle with a higher level of equipment, prefer to compromise on a model with lower specifications whose delivery time is shorter .


• Buying second-hand vehicles - instead of waiting for many months until delivery, there are drivers who prefer to turn to the used market and purchase available vehicles.


• Postponing the purchase - extending the use of the existing vehicle for a longer period of time, with the aim of buying a new vehicle after the shortage is resolved.


• Expanding the protection - As mentioned, many drivers are expanding the protection of their existing vehicles with the help of car insurance that includes comprehensive insurance, due to the growing fear of theft.



The global shortage of vehicles is still here, and it is expected to accompany us for the foreseeable future.

All that remains is to hope that the automotive industry will soon return to the road and until then, exhaust the options available to us.

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  • technology

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  • Chips

Source: walla

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