Shortage of microchips

Shortage of microchips: this is what it’s doing to the automotive sector

Prices of used trucks are rising sharply due to the global shortage of microchips. As a result, truck manufacturers are finding it increasingly difficult to meet the demand from the transport sector. The inability to deliver new trucks on time has a direct effect on the used truck market.

In this blog article you’ll read:

What are microchips used for?

Nowadays there are so many microchips (also called semiconductors), incorporated in our trucks that we hardly think about it anymore. The days when a truck was a mechanical piece of technology are long gone.

Of course there are semiconductors in the engine management of the truck, but what about the integrated infotainment systems in modern trucks? The dashboard of a new Mercedes-Benz truck, for example, basically looks like 2 mounted tablets. From there you can get all the information you need and also control most of the functions.

These systems work on the oh so wanted microchips, among other things:

  • Climate control
  • Adaptive cruise control
  • Integrated weighing system

Causes of microchip shortage

What are the causes of the microchip shortage? What caused truck manufacturers to regularly shut down production?

JIT delivery
Producers of trucks and cars all work according to the Just In Time delivery system (JIT delivery). This requires them to be able to look far ahead. Suppliers deliver the parts in most cases in the last 24 hours before production. This process ensures that all parts go into production in the right order. So there are few parts in stock for a long time, which is beneficial for the financial balance. After all, stock is dead money! But which is not beneficial if you have a chip shortage.

Corona pandemic
With the outbreak of the corona pandemic in the early 2020s, manufacturers had to look even further ahead. What effect did this pandemic have on new truck and car sales?

Globally, manufacturers were gloomy about sales of new vehicles. They therefore cancelled orders with suppliers. However, the suppliers of microchips did not see a drop in sales of their products. The pandemic caused consumers to spend more money on game consoles and other electronics that also contain semiconductors.

Because of the pandemic, consumers are massively changing the way they spend their money. Instead of a vacation or a night out, we are now investing in luxury items. We do this to make the many days spent sitting at home as comfortable as possible. All these goods have to be transported, which increases the demand for transport enormously.

Truck manufacturers are seeing order books fill up at a rapid pace. They have to start placing new larger orders with the microchip suppliers again. Semiconductor manufacturers are already running at full speed to meet demand for game consoles and similar products. Truck manufacturers can join the back of the queue. The cancellation of large orders at the beginning of the pandemic is now costing truck manufacturers dearly.

Effects on the market

Long delivery time new trucks
If you were to order a new truck now, there is a long delivery time. Depending on the model and version, the delivery time is between 7 and 11 months. Has the truck been delivered by the factory? Then all sorts of things still need to be done before you can actually get to drive it. This includes: a build-up at a truck body company, painting the truck, and building in the after-sales accessories.

Crowded truck rental market
A carrier with a capacity shortage cannot possibly wait that long for a new
truck. So he starts looking for other solutions. In the short term, renting a truck may be a solution, but the rental market is also quite overstrained. Those who think that with a phone call they will have a rental truck at their doorstep are wrong. You have to search carefully before you find a suitable vehicle.

More and more transporters are entering the market for (young) used trucks. They then purchase several young used trucks through a brand dealer. In addition, leasing used equipment is becoming increasingly easy because of the ever longer lifespan of modern trucks.

Price increase of used trucks
These developments have an effect on the price of used trucks. These prices are now spiking enormously. A survey in the data of our website shows that the prices of used trucks have increased by about 30% in the last 2 years. It regularly happens that certain sought-after models of 1 to 2 years old, are offered for the then new price. Better expensive than not for sale, we might think.

Future outlook

Truck manufacturers around the world are cautiously looking to the future with a positive outlook:

Chip manufacturers are expected to be able to meet the demand of the automotive sector (freight) again by the first quarter of 2022.

It will then be up to the truck manufacturers to start making up for the delays in the delivery of new trucks as quickly as possible. Whether this will have a direct effect on the prices of used trucks remains to be seen. After all, the prices of new trucks have also risen considerably. And will this expectation cause transporters to start buying new trucks en masse? Or will they first wait and see and rely on (young) used equipment? The future will tell.