Why is There a New Car Inventory Shortage?


The car chip shortage is the most important underlying cause of the new car inventory shortage. Chips, also known as semiconductors, are used in every vehicle—and they’re not as readily available as they once were. 

One question naturally leads to another: why is there a car chip shortage? The answer has a lot to do with the pandemic, but Russia’s invasion of Ukraine has contributed to the industry’s challenges too. We’ll take a closer look at these compounding factors below, and then we’ll provide a few helpful tips for shoppers who need a new or pre-owned vehicle at this time.

Understanding the Car Chip Shortage

Modern, technologically advanced cars and SUVs may require as many as 1,200 semiconductors. Moreover, the process of building these microchips is both time-consuming and sensitive. When pandemic lockdowns started to cause repeated slowdowns in the microchip manufacturing process, many electronics makers suddenly found that there weren’t enough chips to go around.

To make the problem worse, demand for automobiles fell during the earliest stages of the pandemic. That trend would reverse in a relatively short amount of time—but not before chip manufacturers had worked out new partnerships with the makers of home electronics and handheld devices. After all, demand for these products increased rapidly at the exact same time that people temporarily stopped seeking out new vehicles.

By the time that demand for vehicles picked back up again, automakers would discover that they could no longer produce new vehicles as quickly as their customers would have liked! That’s the ultimate source of the new car industry shortage that continues to impact Providence and East Greenwich dealerships today.

When Will the New Car Inventory Shortage End?

Unfortunately, it’s not entirely clear when the new car inventory shortage will start to resolve itself. That’s partly because manufacturing slowdowns continue to occur whenever new variants work their way through the areas where semiconductor factories are located. It’s also increasingly due to the fact that the vast majority of the world’s palladium and neon—two essential microchip components—are produced in Russia and Ukraine. Neither country is currently able to produce or sell these materials at normal levels.

The new car inventory shortage could last until 2023, 2024, or even later—but automakers and their dealership partners aren’t just waiting around. Most have made it easier than ever to order a vehicle online or reserve a model before it arrives on the lot! This trend is set to continue even after the new car inventory shortage is resolved.

Tips for Shopping During the New Car Inventory Shortage

We know that the most satisfied customers are also the best informed, which is why we make an effort to provide useful car shopping tips to drivers from all over the Cranston area. If you’re shopping for a new or new-to-you vehicle during the current inventory shortage, then you should keep these points in mind:

  • With higher-than-average demand and lower-than-average supply, new cars are selling for higher prices than they normally would. 
  • With fewer new cars available, more buyers are turning to the pre-owned market. And that means that prices for pre-owned vehicles are going up, too.
  • There’s a bright side: since pre-owned models are fetching record prices, your current vehicle might be worth much more than you’d expect! We’d love to buy your current car and add it to our inventory, and we’re willing to pay top dollar—even if you don’t need a new vehicle off our lot.

In Uncertain Times, Mercedes-Benz of Warwick Has Your Back!

If you’re looking for a particular kind of model, you can take advantage of our vehicle finder service and let us do the legwork for you! We’re here to help with any questions on your mind, so don’t hesitate to start a conversation online or visit our dealership in Warwick, RI.


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