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Why the wait? Carefully plan vehicle replacement in a semiconductor shortage

 Published 20th December 2021
General Guides 

The global pandemic has understandably had wide-reaching impacts. While by no means the most important when compared to human care, one industry that has been hit particularly hard is automotive.

As Covid initially spread across the world, car factories shut down and parts supplies cancelled, including semiconductor processing chips. But how has this led to a shortage of new models on the road, rising prices, and a booming used car market?

Restricted semiconductor supply

Used extensively across a vehicle, from interior screens to power management, chips are vital to the production and operation of cars and vans.

With a worldwide shortage of semiconductor materials and chips , there are fewer vehicles rolling off production lines than before the pandemic set in. Automotive bosses and leasing industry experts are expecting the supply of new cars to be restricted until at least the end of 2022, and likely 2023 before the market is back in full swing.

Emphasis on electric

Because of strict regulations in the UK and European markets, and around the world, manufacturers are having to be careful as to which vehicles they build with the supply of chips available. This is skewing certain markets more than traditional customer demand would, as a significant percentage of a manufacturer's vehicles built need to be electric.

By keeping under an average CO2 emissions bracket, the manufacturer will avoid hefty fines, which puts a greater emphasis on greener models than ever before. If a car maker simply built its best-selling models to maximise sales, the likelihood is that the average emissions would be too high.

As such, the supply of EVs - although still impacted - is not as fiercely hit by Covid-linked semiconductor shortages as most other models. Considering the financial benefits for both fleet operator and driver, it is likely to be a benefit in fact, as customers want to get in their new car as soon as possible.

Stock available

Having sourced vehicles well in advance, Gateway2Lease has stock available, particularly for electric vehicles , but for all sorts of makes and models.

“Despite a general shortage of executive models due to demand and restricted production, we still have good stock availability on many models,” says Rob Marshall, Operations Director of Gateway2Lease.

“It can make a significant difference in the vehicle replacement process by having access to new models, leasing firms can smooth out the impact of a country-wide shortage.

“It means avoiding the likes of formal extensions for companies and fleet operators, where replacement vehicles can't be delivered, or models collected.”

However, Rob did add this warning.

“With fewer cars available we are seeing prices creep up, a situation we expect to be sustained for a while yet until the car maker factories crank up to full capacity again.”

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