Why are new car sales falling?

New car sales in the UK slumped more than a third last month as the persistent shortage of computer chips hampered trade.

According to the Society of Motor Manufacturers and Traders (SMMT), only 215,312 new cars were registered in September – the lowest this month since the “two-license plate” system was introduced for new cars in 1999.

In September 2020, over 320,000 new vehicles were registered. However, the SMMT found some signs of optimism and pointed to the best monthly EV sales to date.

READ MORE: Millions risk missing MOT renewal dates and voiding their car insurance

Why are new car sales falling?

The production of new vehicles – and thus sales – has been severely affected in recent months by a long-term shortage of computer chips.

Of course, modern cars are increasingly dependent on complex technology that requires computer chips to operate.

This has resulted in auto production, although the UK economy has nearly normalized after the worst of the pandemic, has struggled to recover to previous levels.

Why is there a shortage of computer chips?

Although economies around the world are in the process of normalizing after the pandemic, the previous shutdowns have created problems in the supply chain.

Above all, plants in countries such as Taiwan, Vietnam and Malaysia had to stand still for long periods of time – orders for computer chips continued to build up.

After many economies reopened, the demand for technological devices – including smartphones, tablets and laptops, as well as devices for cars – has risen again, putting further pressure on supply chains.

To make the problem worse, automakers cut their orders for chips during the pandemic as they scaled back production – but that put them at the bottom of the queue to restart.

It is not yet clear when the shortage of computer chips will end. Experts believe it will continue into next year and possibly even into 2023.

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