In Sri Lanka, the car market has been in chaos recently. In 2020, due to the government’s import ban, car prices plummeted almost or more than 100%. When we consider the situation in Sri Lanka, it is easy for us to understand what happened.
But does this only happen in Sri Lanka?
Simply “NO”. Car prices are rising all over the world. The average price of a new car in the United States has risen from US$38,000 to US$44,000, an increase of nearly 15%. According to BBC reports, the price of the most popular cars in the UK has risen by 57%.
This is due to a one big reason,
In short, the root cause of the chaos is the shortage of computer chips, which has forced the number of cars produced by global auto companies to greatly reduce. The supply of semiconductor chips has been unable to meet the needs of a wide range of industries. Automakers from General Motors to Toyota have cut production of millions of units because they simply don’t have the necessary chips. A modern car may require thousands.
Manufacturers cut orders for chips in the early stages of the pandemic, but demand for cars is picking up faster than they expected, making them scrambling to buy semiconductors. The global demand for interconnected microwaves and other smart devices has swallowed a large supply, and the Covid-19 outbreak and other unrelated disasters have further derailed the chip industry.
However, people continued to buy vehicles, reducing the supply. At this moment, the quantity of new cars available for purchase is a mere fraction of what it was before to the pandemic. With fewer new automobiles on the market, manufacturers and dealers no longer need to give steep discounts to keep autos moving. They’ve discovered that purchasers are willing to pay more when the alternative is not getting a new automobile at all.
This chip shortage is believed to continue until 2023.
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