For several months now it has been widely reported that supply chains are snarled across the globe.  Logistics channels are overwhelmed, leading to delays in the movement of goods both domestically and internationally.  Ships filled with goods are spending days harboring nearby, waiting to off-load their cargoes.  A lack of empty containers elsewhere means that goods cannot even leave the factory to begin their journey.  Added to this are the recent weather challenges in the South-central U.S. which have caused further delays and shutdowns of facilities that produce critical computer chips for the automotive industry.

A plant fire on Friday, March 18^th, forced the shutdown of a chip making facility located northeast of Tokyo.  The shutdown is expected to last at least one month, further restricting the availability of the chips that are desperately needed by the automotive industry.  The sum of the auto industry’s challenges become clearly apparent when looking at U.S. Domestic Automotive Production.  In the two years leading up to the pandemic, production averaged over 220,000 vehicles monthly.  This contrasts with the data collected during the latest two months ending January 2021.  In this latest period, production averaged 157,000 per month —down from 196,000 a year ago — representing a 20% decline in unit count production.

To clarify, the cause of the recent production decline is not supported by any idea that demand is waning.  Strong demand during the pandemic has seen the average new vehicle price exceed $40,000 for the first time ever.  Government measures of average vehicle price also indicate a year-over-year increase between January of 2020 and 2021.  Quickly rising new vehicle prices have not deterred consumers from purchasing larger and or higher-end vehicles; providing plenty of reason for manufacturers to increase production if possible.