How Video Gaming, the Pandemic, and New Vehicle Production Are Connected (yes, really)
These seemingly disparate things are truly tied together and the impact is being felt in the collision repair community.
In the early second quarter of 2020, the COVID epidemic had caused many manufacturing plants to close. When large parts of microchip manufacturing operations ceased production, suppliers still had plenty of capacity to fill new orders. But as consumer demand bounced back quicker than expected, much of that capacity went to consumer goods such as gaming devices and cell phones. As stay-at-home and work-from-home arrangements peaked, the demand skyrocketed for new or additional computers and gaming systems to help alleviate boredom in off-work hours.
When the automotive manufacturers resumed production a few months later, they encountered existing chip stock piles that had been spoken for by computer and gaming systems that had come back on line fairly quickly after the various lockdowns in their respective countries. This pushed automakers needing these chips for automotive component production to the back of the line.
Auto manufacturers quickly burned through their stockpiles as early as December 2020, and auto plants around the world were idled because they were unable to obtain subcomponents like ADAS systems, infotainment and climate systems, and even power window regulators and door handles, all of which contain microchips.
These shortages may be making their way into collision repair as the supply of these replacement parts dwindles. Longer term impacts will be felt in the collision and insurance businesses if the shortage persists. Lower new vehicle sales volume, driven by lack of supply, will increase actual cash values, increase new vehicle transaction prices, and reduce salvage supply.
How and when will the storage resolve itself? Automakers are aggressively reducing output of less popular models to help stretch the available microchip supply, and production facilities across the globe are adding capacity to meet additional demand, all of which comes at a price. Forecasts indicate that it will take until June, 2021 for the shortage to be resolved, but the lingering impact will be that prices of the microchip-rich components will increase and stay at that increased price. Just another example of the unforeseen impact of the pandemic on our industry.
Who knew that gaming systems could impact collision repair?
Greg Horn is PartsTrader’s
Chief Innovation Officer.