A Hyundai car dealership is shown in Bowmanville, Ont., on Jan. 22, 2022. Around the world, automakers are still struggling with a global chip shortage that has hobbled the industry for much of the past year. Doug Ives/The Canadian Press


Canadians hoping to buy a new or used vehicle in 2022 are in for the same kind of rough ride that 2021 turned out to be.

Continuing supply chain snarls and pent-up buyer demand mean consumers should brace for shortages, staggering price tags and months-long wait times for new orders, industry experts said.

In the new car market, buyers will likely find a dearth of both vehicles and financial incentives on the dealership floor, said David Adams, president of Global Automakers of Canada.

The chances consumers will walk onto a dealer’s lot and find what they’re looking for are slim. Instead, according to Mr. Adams, more and more consumers will have to place an order for the vehicle they want and wait weeks or months for it to arrive.

And with demand outstripping supply, deals will be hard to come by, he cautioned. As of January, Canadians were paying around $44,000 on average for a new vehicle, according to figures from J.D. Power.

Buying a preowned vehicle won’t spare Canadians from sticker shock either. As of mid-February, the average used-car price in Canada was $34,594, up an astonishing 47 per cent compared with the same period in 2021, according to figures provided by Canadian Black Book (CBB).

Normally, cars lose between 20 per cent and 30 per cent of their value in the first year. But with new-vehicle shortages diverting demand to the used-car market, one-year-old vehicles are now often selling for roughly the price of new ones, said Daniel Ross, senior automotive analyst at CBB. He expects that trend to continue into the spring and summer.

Frustrated consumers can blame a lasting mismatch between supply and demand for their woes, according to Shawn DuBravac, chief economist at IPC, an electronics manufacturing trade association.

Around the world, automakers are still struggling with a global chip shortage that has hobbled the industry for much of the past year. Semi-conductors, an essential component of electronic devices, are also a mandatory input for a number of new vehicles’ features, from infotainment modules to fuel management systems to backup cameras.

The shortage traces its origins to the onset of the pandemic in the spring of 2020, when automakers around the world abruptly cut down production – and their semi-conductors orders – in response to what turned out to be a sharp but short-lived drop in demand for new vehicles.

When car sales bounced back and vehicle manufacturers rushed to increase orders from parts suppliers, they found they’d slipped to the back of the line for chip producers, which were also facing soaring demand for products such as laptops and servers from households and businesses adapting to remote work and schooling, Mr. DuBravac said.

While chip makers are producing at full throttle and new manufacturing capacity is coming online, persistently strong global demand for durable goods, many of which require semi-conductors, means the industry will likely take until late 2022 or early 2023 to catch up with the backlog, he said.

And chips are just one of the supply chain bottlenecks facing auto manufacturers, with the cross-border trade delays linked to Canada’s trucker convoy protests adding another disruption to an already strained logistics network.

Rising interest rates, which would make it more expensive for Canadians to finance their auto purchases, are unlikely to have much of a dampening effect on demand this year, Mr. Adams said. That’s because many consumers will be able to trade in their used vehicle for unusually high values, softening the financial impact of higher borrowing costs, he said.

For car buyers with a limited budget, the only options may be shopping for less popular models, such as large sedans, or older vehicles, according to Mr. Ross.

By Erica Alini, The Global and Mail

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