Supplyframe today released research indicating that most consumers anticipate negative fallout from supply chain shortages fueled by the pandemic to continue throughout 2022. This same research shows that the limited supply of vehicles due to a lack of available semiconductors and electronic components has adversely impacted the auto industry’s reputation and led to a shift in customer buying behaviors that prompted some U.S. consumers to buy used rather than new cars – or not to buy vehicles at all.
The research is based on a recent survey, conducted by Propeller Research on behalf of Supplyframe, of more than 1,000 U.S. consumers ages 18 and older. According to the survey results, nearly a third (32%) of U.S. consumers said that they have been impacted by the automotive chip shortage. Close to half (48.3%) said that the resulting lack of automotive inventory led them to buy a used car instead of a new one. About the same number (48.5%) said that they have noticed an increase in automotive prices amid the pandemic, and more than a fifth (21.8%) said that inflated prices have deterred them from buying a car.
“Due to the pandemic, the automotive industry has faced challenges with production as well as with a changing consumer mindset, as highlighted by this research,” said Supplyframe CEO and founder Steve Flagg. “But even beyond the pandemic, the automotive sector will continue to compete with businesses in other industries such as aerospace, consumer electronics and medical devices for a dwindling supply of semiconductors and electronic components. Having multiple industries sourcing from a shared supply will lead to complications even in the long term. Automakers and companies in these other sectors now need to ask themselves how they can better manage the chip shortage to meet customer demand and allow faster distribution.”
A Strong Share of U.S. Consumers Are Now Aware of the Global Chip Shortage and Its Impacts
Chip shortages have dominated headlines since early 2020. So, while semiconductor and electronic component supply chain discussions have traditionally been reserved for new product design and procurement professionals at manufacturing companies, the ongoing pain caused by the auto and chip shortages has increased consumer awareness of such matters.
Nearly half (47.5%) of consumers said that they are familiar with the automotive chip shortage. And almost a third (32%) of those surveyed said that they were impacted by this chip shortage. Only 12.9% of U.S. consumers believe that we will finally be back to normal shipping and production times this year. Just over 40% think shortages will decrease slowly in 2022. And nearly half (46.7%) said that they believe the shortages will continue throughout 2022.
However, while analysts predicted that the shortages would reach a turning point this year, that doesn’t seem to be the case. Supplyframe’s recent Commodity IQ report indicates that global manufacturers can expect severe supply constraints and cost inflation pressure for many component categories into 2023. And that, in turn, is likely to continue to impact consumers.
Many Actual or Would-Be New Auto Owners Have Been Heading in a Different Direction
Limited new vehicle availability due to chip shortages and other supply chain issues forced some frustrated consumers to abandon the idea of getting a new vehicle. Nearly half (48.3%) of consumers said that they bought a used car instead of a new one due to lack of inventory. About the same share (48.5%) said that they have noticed an increase in automotive prices since the beginning of the pandemic. More than a third (39.1%) said that the inflated prices of vehicles mean they had to save up more before buying a car. And more than a fifth of U.S. consumers surveyed said that inflated vehicle prices deterred them from buying a car.
Automotive chip shortages and gas prices are also driving more consumers to consider buying electric vehicles. Nearly a fourth (23.1%) of U.S. consumers surveyed said that they have seriously considered buying an electric vehicle in the last year. More than a fifth (20.8%) said their main reason for considering an electric vehicle was the automotive chip shortage. Almost 60% (59.7%) said their consideration of an electric car was driven primarily by high gas prices.
As electric vehicles have become more prominent, global manufacturers are now trying to enter the predominantly Tesla-dominated field. But for major automakers to make their mark in the electric vehicle arena, they need to take a page from Tesla’s playbook and strive for a more resilient supply chain and employ real-time technology to better anticipate demand.
The Auto Industry’s Reputation Is Taking a Hit – But Solutions Exist for the Way Forward
Supply chain shortages are not doing much to bolster automotive sales or the auto industry’s reputation. In fact, they’re doing quite the opposite. The semiconductor chip shortage is expected to cost the global automotive industry $210 billion in revenue in 2021, according to consulting firm AlixPartners. And nearly a third of the U.S. consumers surveyed by Propeller and Supplyframe expressed their frustration with or pessimism about the automotive industry.
That’s just another pain point that the automotive sector now has to contend with as it works to regain its footing after more than year and a half of chip shortages, fewer cars being made as a result, record-high vehicle prices and demand, and added labor and logistics constraints.
This points to the need for the automotive sector – and industries across the board – to get smarter about supply chains. This will require public-private partnerships to share market intelligence and identify early signs of future shortages to prevent more shortages of this scale.
“Shifting demand, pre-existing supply and sourcing issues, and the ongoing pandemic point to the need for outside-in intelligence on global supply chains and the value of designing resiliency into products,” said Flagg. “Leading original equipment manufacturers in the automotive sector and beyond are beginning to take steps to make sure that happens sooner rather than later.”