Is the auto chip shortage getting better?
The global auto chip shortage has been a significant challenge for the automotive industry over the past few years, disrupting production lines and delaying vehicle deliveries. As we move into 2025, many are wondering if the situation is improving and what it means for car buyers and manufacturers alike.
Understanding the Auto Chip Shortage
The auto chip shortage began in 2020, driven by a combination of factors including the COVID-19 pandemic, increased demand for consumer electronics, and supply chain disruptions. Automotive manufacturers, which rely heavily on semiconductor chips for everything from engine control units to advanced driver-assistance systems, found themselves competing with tech companies for limited chip supplies.
This shortage led to production halts, reduced inventory, and higher vehicle prices. However, recent developments suggest that the situation may be improving.
Signs of Improvement in the Chip Supply
As of early 2025, there are several indicators that the auto chip shortage is easing:
- Increased Production Capacity: Semiconductor manufacturers have ramped up production, with new facilities coming online to meet demand. Governments in regions like the U.S. and Europe have also invested in domestic chip production to reduce reliance on overseas suppliers.
- Stabilizing Supply Chains: The global supply chain has started to recover from the disruptions caused by the pandemic. Improved logistics and transportation networks are helping chips reach manufacturers more efficiently.
- Shift in Consumer Demand: The surge in demand for consumer electronics during the pandemic has leveled off, freeing up more chips for the automotive sector.
Challenges That Remain
While the situation is improving, challenges remain:
- High Demand for Advanced Chips: Modern vehicles require increasingly sophisticated chips for features like autonomous driving and connectivity. Meeting this demand will take time.
- Geopolitical Tensions: Trade restrictions and geopolitical conflicts could still disrupt the supply chain.
- Backlog of Orders: Many automakers are still working through a backlog of orders caused by the shortage, which means it may take time for consumers to see the full benefits of improved chip availability.
What This Means for Car Buyers
For car buyers, the easing of the chip shortage is good news. It means:
- Shorter wait times for new vehicles.
- Potential stabilization or reduction in vehicle prices as inventory levels improve.
- Access to newer models with advanced features that were delayed due to the shortage.
However, patience is still required as the industry works to fully recover.
Conclusion
While the auto chip shortage is not entirely resolved, significant progress has been made. Increased production capacity, stabilizing supply chains, and shifting consumer demand are all contributing to an improved outlook for the automotive industry. For car buyers, this means a brighter future with more options and potentially lower prices on the horizon.
Frequently Asked Questions
How many chips are in the average car?
So, here's the typical range you can expect for a new vehicle rolling off the lot today. On average, you'll find anywhere from 1,000 to 3,000 semiconductor chips in a modern automobile. That's a lot!
Is there still a chip shortage in 2024?
Industry experts and surveys conducted by KPMG and the Global Semiconductor Alliance in the fourth quarter of 2022 indicated the shortage would end in 2023, with more chips than needed in 2024. This prediction came true, thanks in part to an inflation-driven decrease in demand for electronics in 2023.
What not to say to a car salesman?
Let's look at some things to keep under your hat while you explore the lot.
- "I Don't Know Much About Cars"
- "My Current Car Is on Its Last Legs"
- "My Lease Is Almost Up"
- "I'm Going to Pay Cash!"
- "I Already Have a Car Loan Lined Up"
- "I Love This Car"
- "I've Never Bought a New Car Before"
Is the auto industry in trouble in 2024?
Globally, auto sales in the first half of 2024 slowed down compared to the rapid rebound seen in 2023. Sales volumes in 2024 are now expected to reach 91.4 million units, just a 1.8% increase over the 89.8 million units sold in 2023.
How long do microchips last?
Microchips are designed to last for 25 years, well over the average life expectancy for cats and dogs. This means that they will take care of your pet for their entire life. It's important to remember to update your contact information on the microchip's registry if you move or get a new phone number.
Which car manufacturers are not affected by chip shortage?
Top 7 Cars Unaffected By The Chip Shortage
- 2021 Hyundai Sonata.
- 2021 Jeep Compass.
- 2021 Nissan Titan.
- 2021 Nissan Altima.
- 2021 Ram 1500 Classic.
- 2021 Nissan Sentra.
- 2021 Volvo XC60.
- 2021 Ford Expedition.
How long will the microchip shortage last?
Perhaps the biggest insight from our survey is that a large majority (83 percent) of industry leaders expressed confidence that the chip shortage will ease by the end of 2023. That's potential good news for the many other industries and supply chains that rely on semiconductor chips to get their own products to market.
Is car production back to normal?
As the automotive retail industry settles into 2024, there's cautious optimism about returning to 'near-normal' vehicle inventory levels. This is a welcome change from the shortages that began in 2020. But, inventory challenges still loom, especially when it comes to vehicle affordability putting pressure on consumers.
Is the chip shortage getting any better?
Many market analysts agree that the supply chain should be restored to normal capacity and production by the end of 2023 and continue for the next three to five years, with the shortage of AI chip supplies alleviated by the end of 2024.
How long is the car shortage going to last?
News I've been seeing from inside the tech world predicts shortages to last well into 2023/start of 2024.
