Looking to purchase a new vehicle? Good luck. Just like everything else in your life right now, the consumer experience in the auto industry is becoming a frustrating one.
As is typical, there are numerous market forces at work, such as the supply chain issues caused by the COVID-19 pandemic.
“Leather problems, we have interior problems, you name it,” said Jim Griffin, who owns multiple dealerships in Milwaukee. “The factories closed down, the inventory dried up, and it never came back.
He says the pandemic was the most uncertain time he’s experienced in his 50 plus years in the business. “It was scary for everybody,” he said. ” We didn’t know if we were going to be open or closed.”
Myriad reasons explain the issues car manufacturers and consumers are facing, but industry experts say there’s one clear winner: microchips. To build a car, you need doors, windows, wheels, exhaust pipes, and of course an engine. To build a car in the 21st century, you also need microchips. Lots of them.
“The average car today contains anywhere between 150 and 300 chips,” said Sean Tucker, auto industry expert. “They control everything from the tiny valves in an engine to the temperature of the car.”
When the pandemic hit, we stopped buying cars. This caused chip manufacturers to slow production. That seemed smart at the time, but then something else happened. “The problem is that Americans went out and bought everything else that has microchips,” said Tucker. “We needed new computers, new microphones. We needed to do our meetings from home. We needed to do school from home.”
Because of the chip shortage, cars are built but not ready to hit the road. “You’ll drive by new car lots and where you’d normally see 250 cars, you see 20,” said Griffin. “Sometimes as low as ten cars. Some small dealers have no cars.”
Enter the US Government. Last week, congress passed and President Biden signed into law The Chips and Science Act. The Act provides incentives to American companies to manufacture these chips in America. What will the bill do to ease the pain?
“In the short term the bill will do very little,” said Tucker. “There just isn’t a short term solution to this problem. Over the next two or three years, it will increase domestic production of microchips and make us a little less dependent on international politics.”
The bill did not garner widespread bipartisan support. Wisconsin republicans Scott Fitzgerald and Mike Gallagher voted against it. I reached out to them for comment, but both declined, chosing instead to issue a statement.
“The legislation was packed with unrelated measures driving its cost to a bloated $280 billon dollars and lacked guardrails which would prevent China from benefitting from it,” said Rep. Fitzgerald. Rep. Ron Kind (D-WI) disagrees.
“The way to beat china in the 21st Century is to out-educate them, out-produce them, and out-grow them economically,” said Rep. Kind. “We don’t need to have a military confrontation to accomplish all this and the CHIPS act is a response to all of that.”