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New vehicle prices are already at new highs(see chart above) but prices are very likely to climb much higher in 2021.
There are a two key factors that are dovetailing to push prices higher.
As I am warning in the EPJ Daily Alert, overall general price inflation as measured by government price inflation indexes is likely to explode this year as a result of the massive irresponsible money printing of the Federal Reserve last year (see chart below).
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On top of this, and the money supply growth is enough to boost prices significantly, the supply of semiconductor chips is facing strong demand from many directions outside the automobile sector which is going to limit auto production.
Volkswagen, General Motors and Honda facing a significant limitation on supply chips as a lockdown-driven boom in games consoles, laptops and televisions sent demand for semiconductors soaring and threatened to overwhelm chipmakers, reports the Finacial Times.
Fiat Chrysler was one of more than a dozen carmakers forced to wind down plants as contract chipmakers in Taiwan and China were caught off guard by the multipronged surge in orders.
Nissan has been forced to cut production of the Note, its new compact car, in Japan.
The production of more than 280,000 vehicles has already been cancelled for this year, according to data provider AutoForecast Solutions. IHS Markit forecasts that as many as 500,000 vehicles could ultimately be affected.
While a reduction in production of a million vehicles is only a marginal change relative to the global hundred million in annual cars produced, any reduction at a time when inflationary price pressures are pushing prices higher is going to act as an accelerant to the climbing prices.
If you are in the market for a car, by early. You are much likely to see much higher prices by the middle of the year.
-RW
And well well well there is a 3x bear semiconductor etf (soxs) and it has an options chain i can buy Puts against. (I never go long 3x etfs, so i would not do calls on the 3x bull even tho it has bigger upside. Study 3x etf history and you will see why.)
ReplyDeleteDavid B.
Prices in the used vehicle market have been on the rise in conjunction with the new abnormal. I was in the market for a used SUV when the craziness hit. I see that prices are about 7% higher now.
ReplyDeleteAlso, I am thinking of selling a couple of motorcycles and was surprised to see what similar bikes are going for.