Semiconductors. What are they, and how are they affecting car prices?

Industry news

Semiconductors. What are they, and how are they affecting car prices?

2nd August 2021

Semiconductor shortage

In the past two years, the UK’s motor manufacturing industry has seen a somewhat downward trend. This is not due to the quality of output but outside factors such as Brexit and the unpredictable impact of Covid-19. 

Although a global virus and the UK withdrawing from the European Union are unrelated events, they have impacted the car industry in a way that you may have never imagined.

We’re not talking about the price of imported cars or even your newly shipped car having to sit in quarantine for ten days.

We’re talking about the shortage of semiconductors.

The shortage of chips is down to two significant factors: Brexit trade relations and the global pandemic. Our exit from the EU market has restricted our buying power of new microchips to put into our tech. So yes, it played a big part in the shortage; nevertheless, some plans are set to ramp up production here in the UK to counteract this.

During the expansion of microchip production, Covid-19 hit. This caused millions of people to have to isolate themselves and stay at home. This included the employees of many of the factories that produce these chips.

At first, this made it difficult for tech lovers to get the new Xbox or PS5, but this quickly had a knock-on effect on the automotive industry.

With millions of people now working from home, this required laptops, desktop computers, tablets and work phones… and lots of them.

Some companies, such as HP, saw a year-on-year increase of nearly 20% in sales in just one quarter showing record growth, which really shows how much the demand rose.

What is a semiconductor?

A semiconductor is a type of microchip that is in every electronic device. In fact, you’re looking at a collection of chips right now on your computer screen or phone!

When we say that they are in every electronic device, we mean every device- phones, laptops, games consoles, and even fridges (cool, right?) This is just a handful of examples, but there are many more, including your car. 

This might surprise some as I know that when I think of a car, I see a feat of mechanical engineering and not a big computer with wheels! However, microchips in cars are just as important nowadays as the steering wheel! 

Why? Well, I’m glad you asked! Have you ever been on your computer, and it starts glitching, and things just don’t work how you want them to? It can be annoying, right?

When you’re sat at home doing a few searches, although it might feel like the end of the world, in reality, it’s mostly inconsequential. 

Now put yourself in a car going 70mph on the motorway, and the microchips that are responsible for lane-keeping assistance glitch and cause an outage for even a few seconds… that could end up being the opposite of inconsequential.

What does this mean for new car buyers?

Whether you’re looking for a brand new car or a used car, you could be affected by this shortage. 

For new cars, you could simply be waiting a long time to get them due to production delays. For example, German semiconductor manufacturer Infineon, has estimated that 2.5 million cars could be delayed within just the first half of the year.

How is this affecting the price of used cars?

If you are looking for a used car, the main change you may see is the price. As dealerships may be struggling to bring in new stock from production lines because of the lack of the semiconductor, the used market is staying very stable. Some experts are predicting that the price of used cars will rise the more prolonged this shortage is.

What does this mean for dealerships?

With new cars becoming a challenge to find, we expect many dealers to focus on the used car market. However, with many new drivers on the road, or soon to be so with driving tests returning, along with the road veterans getting back out there as the UK’s Covid restrictions ease, we expect car sales to fly, as shown by the record May with a staggering 674.1% increase in sales. From the last two years.

Basic economics talks about the law of supply and demand. If the supply is low but the demand is high, the price will reflect this by rising. This is no different when it comes to cars.

What happens if your financed car cannot be delivered?

Usually, when financing a car, you will be given a delivery date. This means that the vehicle is available and ready for delivery around the time given to you. 

That means if you happen to be the unlucky one that goes for a car that simply cannot be delivered on time, which is becoming a more regular occurrence, then you should have been told this by the dealer themselves.

With Unity, you will have a 30-day finance approval, meaning you can hold off for a month before committing fully to your agreement. We do this to give you time to think about your options and assess the situation thoroughly.

All chips in

Although globally, this is a massive problem right now, with Unity, we want to make sure you have the smoothest journey you can. So contact us now and cut out the stress when buying your next car.