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Transportation & Infrastructure

Auto industry woes grow, and it's about more than microchips now

empty car lot
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Vehicle inventories are extremely low as auto supply chain woes worsen

Things just keep getting worse for the U.S. auto industry.

Plant shutdowns because of a severe shortage of computer microchips are now happening for other reasons.

"It has moved into all kinds of materials, transportation delays, it has moved into the labor shortage," said Alix Partners Managing Director Dan Hearsch. "Many things that we expected to have been resolved by now — not the least among them COVID itself."

Foreign supplier factories continue to be plagued by COVID-19 outbreaks, said Hearsch, and the labor shortages are pretty much everywhere in the supply chain in the U.S.

"They're affecting ports. The suppliers don't have people to run overtime. The steel mills, they're working people seven days a week," he said.

Hearsch does not expect vehicle inventories on dealer lots to approach more normal levels for at least a year, perhaps as long as a year and a half.

Sedans are in the shortest supply, he said, because auto manufacturers are throwing their most herculean production efforts into higher-profit vehicles: pickup trucks and large SUVs.

The inventory crunch means the average price of a new vehicle is higher than ever before. Kelley Blue Book's August report showed an average new vehicle price of $43,000, an all-time record.

Used vehicles are also extremely high due to the ripple effect from the new car shortage.

"I'm shocked," said Hearsch. "I looked at the value of my truck, I have a 2018 full-size pickup for moving horses and things around. Three years old, and I could sell it for more than I paid for it new. When has that ever happened?"