There are many industries that are struggling right now, but few as much as the new car industry. New car sales slumped to their second-worst performance in May for 30 years – second only to May 2020 (COVID-19) – and there are a few factors that have influenced this creating a “perfect storm” scenario in the auto industry. So, why is the new car industry struggling so much right now?
The Semiconductor Shortage
One of the primary reasons why new car sales are struggling is the ongoing semiconductor shortage. The product of the small computer chips that are used in modern-day vehicles (and many other consumer goods) was slowed down at the start of the pandemic and has since been unable to ramp up production to meet demands. This has created a situation known as “chipageddon” with car manufacturers unable to get their hands on these chips. This shortage is expected to last well into 2024, so this is not a situation that will be resolved quickly.
Other Supply Chain Issues
There are also other supply chain issues that are hampering production and leading to fewer sales. Manufacturing has dropped by almost a third with companies unable to get their hands on different parts as well as the rising cost of production. These supply chain issues have arisen from the consequences of the pandemic, the war in Ukraine and Brexit just as a few issues impacting production right now.
The Cost of Living
Of course, the cost of living crisis is another major reason why the sale of new cars is plummeting. Many people are struggling to make ends meet each month as a result of inflation, the energy crisis and the fuel crisis. As a result, people are delaying large purchases like new cars and shopping in the used car market if they are in need of a vehicle. Even the cost of used cars is rising as a result of demand, which is creating a problematic situation for many motorists in a time when the cost of living is a serious issue.
As a result of this, many people are turning to leasing instead and this could be a smart move. Leasing can be a smart move financially as you can spread the cost and avoid depreciation while still being able to get behind the wheel of a brand new car.
It is a troubling time in the auto industry right now, especially with new car sales slipping to their worst figures in 3 decades in May other than 2020. There are various reasons why the industry is struggling and many of these issues will not be resolved swiftly, so it is understandable why motorists are looking to alternative solutions like leasing to save money.