I know that we have seen some return to normal life since the pandemic. COVID-19 however, continues to play a part in the national work truck and vehicle shortage we are seeing. Many manufacturing plants were and are shut down to deal with the pandemic, but that did not slow the consumer demand for electronic products. Many people had to adapt to remote working which increased demand for technology like laptops and monitors. This forced semiconductor manufacturers to shift their focus from vehicles to computers to keep up with the current market’s needs.
Newer trucks and vehicles require semiconductors to power onboard computers and LED dashboard displays and safety systems. The auto manufacturers tried to regain full-scale production, but they hit a snag when they realized semiconductors simply were not available. That left a ton of new trucks and vehicles sitting in parking lots waiting for semiconductors. The chipmakers are stressed! The high demand was then met with headwinds of natural disasters like fires or cold weather that forced plant closures, putting the already supply even further behind.
What does all this mean? It means the supply of trucks and vehicles has dwindled and prices are up. Everyone is trying to buy right now. Many auto manufacturers have stopped taking orders of 2022 models. Fewer trades occur when sales of new vehicles drop. In the meantime, it is hard to get new or used trucks and vehicles. If you tried to get around the expense of a new work truck, you looked down the used route. Supply shortages have increased used work prices by as much as 25%. Many ½-ton work trucks have seen price increases of $8,000 to $9,000. The 2022 models have been delayed due to the chip shortage and the manufacturers trying to keep their costs down from making work trucks that they cannot sell because of the chip shortage.
When will this shortage end? Earlier this year, the experts thought it would be a quick summer issue with things getting back to normal by the end of August. More recently, however, they say it could be upwards of a year until the shortage is over. The shortage has cost the manufactures billions. Some manufacturers stockpiled semiconductors, kind of like the recent toilet paper shortage. Demand is like a bullwhip. A small flick of the wrist can lead to a big crack at the other end. Demand falls and rises like a combination of low demand for new trucks and higher demand for laptops and game consoles for lockdown entertainment. New trucks and cars can contain hundreds of chips. The manufacturers that hoarded chips made the problem worse.
Containers were left in wrong locations as trade shifted, shipping capacity was reduced and ships could not land where they intended. Coupled with congested ports and problems with timely unloading and onward transportation, the typical container spends 20% longer in transit. Rates are also up 80%. Even a 10% increase in container freight can reduce industrial production by 1%.
Hang in there and see us to order your work trucks and business vehicles. While the vehicles are delayed, we want to be at the top of the list when production levels return to pre-pandemic levels. Check in with us to stay on top of shortage. We can help!
The Fisher Leasing Team