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Report shows US chip supply alarmingly low, Congress urged to act

Driving a Car
Posted at 9:44 PM, Jan 25, 2022
and last updated 2022-01-25 21:47:06-05

SOUTHFIELD, Mich. (WXYZ) — The lot and showroom at Southfield Chrysler Dodge Jeep Ram has been a bit emptier than usual these past few years as dealerships across the country feel the brunt of a global semiconductor shortage.

These chips are essential to manufacturing new cars.

“We’re sitting at about 10 to 15 percent of what we usually carry,” sales manager Matt Batulis said. "We’re sitting at about 150 cars when we usually carry close to 1,000.”

The lack of supply is making it a challenge for customers to find the car they want at the price they want. The lack of chips has also led manufacturers to cut back on additional features like sun roofs, powered seats and other electronics.

“It's definitely a little bit stressful," Batulis said. "Obviously, we’ve been able to manage it so far.”

The shortage of these computer chips has hit the auto industry particularly hard, causing disruption for manufacturers all the way down the line to consumers.

“We have never seen new vehicle inventory this low,” Michelle Krebs, an executive analyst at Cox Automotive, said. "Right now there are about a million vehicles available to buy across the United States and usually it’s twice or three times that.”

Krebs says the lack of supply has raised the average new car price to over $47,000. A new report released Tuesday by the U.S. Department of Commerce shows that’s unlikely to change anytime soon.

“This is the first time we've actually seen them put a number on how low the supply is,” Krebs said.

In that report, the department says the supply of chips for manufacturers is alarmingly low. In 2019, these companies had 40 days' worth of supply on hand. In 2021, it fell below five days' worth of supply. Any disruption to a foreign chip plant, even for a few weeks, could lead to major shutdowns in the U.S.

“People that I represent are on layoff again, several of the plants are shut because they don't have semiconductor chips,” U.S. Rep. Debbie Dingell of Dearborn said.

Dingell says urgent action needs to be taken by Congress. The Department of Commerce is also calling for lawmakers to pass legislation, which would allocate $52 billion for domestic chip production.

“I know so many companies that have come to visit me that say if that CHIPS Act passes, we’re in,” U.S. Rep. Elissa Slotkin of Michigan's 8th District said.

Like Dingell, Slotkin is also pushing for legislation to pass. She expects the bill will have bipartisan support when it's brought up in the next few weeks,and hopes to see it signed into law by early spring.

“American manufacturing is the key, and I know a lot of companies that will be watching what Congress does in the next six weeks,” Slotkin said.

“We've got to act," Dingell added. "We should have acted months before. The time is now and Congress cannot put this off anymore.”

Even if this bill passes, it would take time to ramp up domestic manufacturing, meaning the auto industry will not see an immediate impact.

However, Krebs says with the way the auto industry is heading, more and more chips will be needed in the future.

“As we move to electric cars and more autonomous vehicles, we’re going to use more chips," Krebs said. "So, it’s a problem that needs to get solved.”

In the meantime, dealerships are asking customers to be patient as they deal with limited supply and options on new cars.

“(We're) at least a year, year and a half out to more normal inventory," Batulis said. "I don’t know if we’ll ever see the inventory we had beforebut a better selection than what we do have.”