Why is There a Chip Shortage?

Modern cars and SUVs require many semiconductors—also known as computer chips—in order to deliver the advanced features that Los Angeles and Pasadena drivers rely on. If you’ve done your research, you know that a massive chip shortage is having a major impact on the automotive industry. But why is there a chip shortage, and how long will the impact of the chip shortage affect car shoppers in the Arcadia area?

The current car ship shortage is due to multiple factors, including the ongoing COVID-19 pandemic and Russia’s invasion of Ukraine. The impact of the chip shortage could persist for months or even longer, but our team can help you make the best of this less-than-desirable state of affairs.

Factors Contributing to the Car Chip Shortage

• Supply: The process of manufacturing computer chips was deeply impacted by the coronavirus pandemic. The process was already complex, and new restrictions complicated it even further. Many producers are still working to return to full capacity after the initial shutdown took place in 2020.
• Demand: An increased demand for electronics among consumers placed an additional strain on the industry. With more people buying laptops, TVs, and other equipment, chips became less readily available to automotive manufacturers.
• Materials: Palladium and neon are two of the most important components in semiconductors, and these materials can only be found in certain locations. Russia—currently facing sanctions—controls up to 44% of the global palladium supply. Ukraine—currently facing an invasion from its larger neighbor—controls up to 70% of the world’s neon.

Although this isn’t necessarily related to the car chip shortage, it’s important to note that military conflict is also impacting the manufacturing of other important parts. Vehicles or parts that are built in the region may have their supply restricted even further.

How is the Chip Shortage Affecting New & Pre-Owned Vehicles?

A lack of semiconductor chips has had one major impact on the automotive industry: fewer new vehicles are being produced, and a decrease in supply has caused an increase in prices. Since this rise in prices has forced more would-be new car buyers into the pre-owned market, prices for pre-owned vehicles are rising too.

If you’re hoping to upgrade your drives through Arcadia and Alhambra, you’ll need to consider each of the following points:

• It might be harder to find the perfect new vehicle on local dealership lots. For that reason, we’ve made it easy to reserve a new Mercedes-Benz or place a custom-order with the factory.
• Prices for new and pre-owned vehicles have gone up—but you can offset these increased costs by trading in an old vehicle! Just like pre-owned vehicles on dealership lots, trade-ins are fetching higher prices than ever before! We can help you assess your vehicle’s trade-in value today.

How Long Will the Chip Shortage Last?

The chip shortage affecting cars and SUVs isn’t expected to dissipate any time soon. Although vaccination rates have improved and manufacturing in some sectors is returning to pre-pandemic levels, ongoing conflict and future COVID-19 variants may continue to impact semiconductor manufacturing well into the foreseeable future.

Beat the Chip Shortage at Mercedes-Benz of Arcadia!

Choosing to work with a team that you can trust is one of the best decisions you can make during the ongoing automotive chip shortage! Start exploring our special offers on new Mercedes-Benz vehicles today.