By Tom Ozimek
Wholesale used car prices hit a record high in September with the chip shortage and other supply constraints squeezing new-vehicle inventories and combining with strong demand to send prices soaring.
The Manheim U.S. Used Vehicle Value Index rose 5.3 percent over the month in September and by 27.1 percent over the year to an all-time high reading of 204.8. The index is one of several datapoints that provide a snapshot of trends in the secondhand car market, with Manheim being the world’s largest wholesaler of used vehicles.
Wholesale prices paid by dealers typically end up getting passed on to consumers. At the end of August, the average list price for a previously-owned vehicle was nearly $26,000, according to Kelley Blue Book, while the most recent government data (pdf) showed that used car and truck prices were up 31.9 percent over the year in August.
“When the Manheim Index hit a record high of 203 in May, we believed that numbers in the 200s would be behind us for some time,” Cox Automotive Chief Economist Jonathan Smoke said in a statement.
“However, the new-vehicle production problem worsened instead of getting better” in the third quarter of 2021, Smoke added.
The pandemic has disrupted semiconductor manufacturing, and with carmakers now facing stiff competition from the sprawling consumer electronics industry for the reduced supply of chips, the shortage has led to production cuts by automakers around the world.
A recent report from consulting firm AlixPartners estimated that the global chip shortage would lead to 7.7 million fewer vehicles produced in 2021, costing automakers $210 billion in lost sales.
Automobiles have become increasingly dependent on semiconductors for everything from safety features such as airbag deployment and emergency braking assistance to computer management of engines for better fuel economy and performance.
While the United States remains the global leader in chip design, roughly 80 percent of semiconductor foundries and assembly and test operations are concentrated in Asia.
Washington has recognized the vulnerability of foreign semiconductor supply chain reliance, with bipartisan efforts on Capitol Hill seeking to bolster domestic semiconductor supply chains by incentivizing manufacturing in the United States.
Detroit’s Big Three automakers were among a number of major firms to attend a Sept. 23 meeting at the White House hosted by Commerce Secretary Gina Raimondo, who has called the lack of chip production in the United States a “national security risk.”
A readout of the meeting indicated that the administration “reaffirmed that industry needs to be in the lead in resolving the supply chain bottlenecks that are occurring due to the global chip shortage,” while Raimondo called on companies to provide information on the chip supply shortage within 45 days.