We have a direct source here that says it will “start to ease” in the next few months. The chip problem starting to get better and the chip problem being better are two very different things. Now factor in that those chips need to make their way through the supply chain into products, which takes time, and then into the cars those products go into, which takes time, and then build inventory levels back up to match demand. I don’t think the timelines between the chips starting to ease in Sept and vehicle issues dragging halfway into next year are that out of bed with each other.
3 Likes
The truth will probably be somewhere in the middle, i.e. longer than 2 months but definitely not two years away. It reminds me of the early pandemic days, when some were saying a reliable vaccine would be 3+ years away. Of course dealers want you to think there won’t be chips ever again, and while we’re at it, did we mention how important the ‘protection package’ is?
2 Likes
Since computer chips are so valuable, we need a chip protection package for every car leases.
3 Likes
2nd Quarter next year is my guess.
would have already been abated if administration after administration didn’t allow high tech manufacturing to be sent overseas, so as to now be able to invoke the DPA to produce more.
I know that a lot of super high end chips are still made in america. however, the lower end ones used for cars still do have applications in various important industries, including defense. the fact that this has gone on this long is a joke.
1 Like
Auto industry has to make back all the $ they lost in 2020 somehow, why not couple a chip shortage with a global pandemic to have cars that went for 15-20% off to now being over msrp
Even some stroller/car seat manufacturers are having supply chain issues 
Have been waiting for a re-stock alert for our upcoming baby’s travel system for 45 days and counting. Haha
1 Like
Front page articles this week in the WSJ and NYT on car prices (used and new)…some incredibly bad advice, but not surprising as they’re journalists…one person said leasing could be a way of mitigating the damage!
Can’t recall reading one article in these publication from spring that told their readers to buy back then…
Anecdotally, articles like these are usually a sign of a market top.
2 Likes
Agreed - news headlines are often a lagging indicator of economic trends, especially those driven by consumer sentiment.
I can’t wait for those headlines 6 months from now about “the collapse of the used car bubble”…
4 Likes
If you made everything in the US, then the MSRP will hike forever.
The high-end business stays in the US because they don’t mind about the cost, just like defense.
1 Like
In my opinion leasing could be a way of mitigating the damage. If you have to pay msrp or over today, and in a year people are getting 10% plus off, your depreciation hit is going to be immense.
You might be paying more to lease today, but in the long run you might be very happy that you can just give the car back.
- the existing labor is union, or
- they can add non-union labor in the US but not at home (eg VW/Audi), or
- currency exchange/risk is more favorable here than at home
To add a few.
Exactly. Even if you leased something with a bump sticker, you only paid the agreed depreciation, rent, and tax.
In 3 years, nobody will utter a peep about the captive drowning in that negative equity.
3 Likes
Negative lease equity is the European equivalent of cash on the hood domestic incentives.
Hans: “It’s unseemly to offer 20% off on our luxury models”
Franz: “I know, let’s bump up the RV 10%”
3 Likes
The manufacturers buy the rate-down and residual-up every month. Here, there, everywhere.
Right now the cost of moving metal has never been lower, they just can’t move it fast enough. By the time they are able make enough, they will have to subvend one/both (and rates will probably be higher). It’s a hard-knock life.
3 Likes
Right, but that really means the captive arm isn’t truly hemorrhaging money when times get back to normal. If ASPs after these leasing incentives still allow for reasonable positive margins I won’t be shedding any tears for the manufacturer or its captive.
For the brick-and-mortars that white-label a captive *FS (Chase, BofA, US Bank), agreed. For the others (including the part of VCFS that isn’t Bank of America), they better be raising every penny they can now, because whether they burden the manufacturer or the “captive”, they have to raise-and-spend that cash on trunk money (cash-cash) and buying rate down/residual up (in normal times might be covered by cashflow from current investments, since most of those sold early to Vroom, not so much).
1 Like
This is the most precise/concise synopsis of:
- chip shortage 2020-present (synopsis with update on production) with information about that industry’s expected expansion and investment
- autos specifically, including Japan and update on exogenous events
- update on the broader electronics market, inflation, pull-forwards
If you read/watch/listen to 1 thing about Shortages, pick this 19 mins (2 min at the end is a horribly long securities disclaimer)
2 Likes
If I’m paying MSRP for a lease or a purchase, I’m still taking the hit.
For example, I leased a Subaru Forester for $355/month in April…that same car now leases for nearly $100/month more…why? I paid $29.8K, current buyers are paying $33.4K (MSRP) which is $100 month more ($3600 total over 36 months). There is no way around that.
Yes, but on the lease your loss is capped at $3600. It’s the typical risk mitigation that could make leasing a good option in any market, but with so many unknowns in this market, it could end up being even more beneficial.
Here we go again. 
2 Likes