The global pandemic has disrupted the automotive industry in numerous ways, and one of the most significant consequences is the skyrocketing prices of new cars. This has become a distant dream for the typical American family, as the average monthly payment for a new car has soared to a record $777, which is almost a sixth of the median after-tax income for US households. The exorbitant prices of new cars have become a symbol of wealth, indicating that new cars are only for the rich now as automakers rake in profits.
Automakers have always relied on chip suppliers to manufacture cars, but the pandemic has exposed the vulnerabilities in their supply chains. The global chip shortage has led to factory shutdowns, production cuts, and delays in the delivery of new cars. As a result, manufacturers are keeping inventories low and prices high. This has created a perfect storm, leading to the scarcity of new cars and the corresponding increase in prices.
The shift to electric vehicles (EVs) is exacerbating the situation. With the global push towards sustainability and the phasing out of internal combustion engines, automakers are ramping up production of EVs. However, this has created a new set of problems for the industry. The demand for batteries, which are a crucial component of EVs, has led to a shortage of lithium, cobalt, and nickel. This, in turn, has led to an increase in the prices of these raw materials, which has translated to higher prices of EVs.
Furthermore, the high prices of new cars have widened the gap between the rich and the poor, as the former can afford to pay for new cars, while the latter are forced to settle for used models. The average monthly payment for used cars has climbed to $544 a month on average, which is also a significant burden for many households.
This situation has put automakers in a difficult position. On the one hand, they need to continue to make profits, especially after the losses incurred during the pandemic. On the other hand, they must balance their profits with the needs of their customers, many of whom are struggling to make ends meet.
To address this issue, some automakers are offering incentives and discounts to customers. Others are looking to increase their production capacity to meet the demand for new cars. Additionally, some are investing in research and development to find alternative sources of raw materials for batteries, which could help reduce the prices of EVs.
In short , the pandemic has had a significant impact on the automotive industry, leading to a scarcity of new cars and the corresponding increase in prices. This has made new cars a symbol of wealth and relegated them to the domain of the rich. The shift to EVs has exacerbated the situation, creating a new set of problems for the industry. However, there is hope that the industry can find a way to balance their profits with the needs of their customers and make new cars accessible to all.