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Worsening Chip Crisis? Wait Time For Auto Chips Soars To New High From When The Pandemic Began, Says Sell-Side Analyst

The semiconductor crisis worsened for the U.S. automakers in the third quarter as the waiting period for key chips soared to the highest since the start of the pandemic, as per Kerrigan Advisors, a sell-side advisor for auto dealers.

What Happened: The wait time for chip deliveries soared to over 20 weeks in the third quarter even as dealerships delivered record profits, driven by higher inventory turns, and lower vehicle days supply.

Despite 2021’s record profitability, the vast majority of dealers today expect profit to rise even further over the next 12 months, as inventory remains constrained and demand remains high, as per Kerrigan Advisors' latest Blue Sky Report

“Auto dealers in the U.S. are shifting from a more is more mentality to a less is more perspective for both employees and inventories, distancing themselves from the antiquated pre-Covid economic architecture of less productive employees and an oversupply of inventory.” Erin Kerrigan, the founder of Kerrigan Advisors, wrote in the report.  

Why It Matters: Low inventory and high profit have become a way of life for U.S. automakers, which are making their most profitable models first. Inventory has slipped to nearly twelve-year low and dealerships struggled to find enough units. 

Ford Motor Co F -1.97% CEO Jim Farley had earlier this year said the automaker is relying on tight inventory and plans to “run our inventories historically lower.” Ford recently said the semiconductor shortage could stretch to 2023.

Ford, along with legacy rival General Motors Co GM -2.26%, has had to halt production this year at various U.S. factories due to the chip crisis. 

Electric rival Tesla Inc TSLA -3.15% delivered record third-quarter sales but said it was struggling with chip supplies, forcing its CEO Elon Musk to say the electric vehicle maker does not have a demand problem but it faces a production ramp-up issue. 

U.S. listed Chinese electric vehicle maker Nio Inc NIO -5.87% too has complained about chip shortages affecting delivery and waiting period.

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