New cars have a problem. By now, I’m sure you’re aware that we simply cannot manufacture enough semiconductors to combat the chip shortage. Nowhere has the impact of this been felt more than in the automotive industry. Sure, you may not be able to get that new PS5 either, but the auto industry is inarguably the hardest hit by the shortage. Moreover, automakers are getting creative to meet demand and keep consumers in dealerships.
VW wants to direct purchase chips to fight back
Per Reuters, Volkswagen is looking at directly purchasing semiconductor supplies direct from vendors. It’s a big and very competitive move. Why buy semiconductors when you can make your own? Frankly, it’s a brilliant business play and a great way around the chip shortage. Knowing VW, they’ll be selling semiconductors to the rest of the industry by the end of the month.
To be fair, VW was among the first to warn about the chip shortage way back in December, which admittedly feels like it was about 30 years ago. According to a nameless executive at VW that spoke with Reuters, the brand is already in talks to make this happen. As the industry begins to rely more heavily on computers in new cars, it’s set to signal a shift in the industry. But how are we paying for it?
Dealer markups are a symptom of the chip shortage
Frankly, it’s not manufacturers making us pay for it, it’s dealers. It’s not like VW or anyone else is hatching some Dr. Evil-level scheme to mark up semiconductors and make the consumer pay for it. At least, not right now. Dealers however want their taste. Your local dealer can’t keep cars on the showroom floor right now. Demand is absolutely rabid for new cars. And the sharks smell blood in the water.
Dealers know the average shopper wants to walk into a dealer looking for a new car and leave with one. Dealers also know that some people are willing to pay a little extra to get their hands on that hot new Bronco or Telluride. So, that leads to the dealer gradually charging more for the car. Often you’ll see things like a $4,000 “market adjustment” charge on the window sticker. That’s the markup. And Ford isn’t telling dealers to do that. They’re doing it because of the chip shortage.
When will it stop?
So, when can we expect to see this chip shortage nonsense stop? According to Bosch, a major semiconductor supplier, it could be well into 2022. The issue is, the supply chain to make these little monsters isn’t caught up yet. For now, it’s best for consumers to sit tight and weather the storm. Or sell your car and laugh all the way to the bank, for a little while longer at least.