Driving Change

I live next door to a couple of car fanatics. One worked for more than thirty years as an engineer at an auto assembly plant, and the other owns a small manufacturing company. The vehicles in their driveway are never more than three years old, and they are meticulously maintained. If a neighborhood child hits one of them with a frisbee, insurance information is exchanged.

By contrast, I have a 13-year old clunker whose onboard navigation doesn’t include a number of roads which have been constructed during its lifetime. There is dirt on the exterior that could be considered “vintage.” It drives the neighbors crazy.

I’ve been considering getting a new ride for a while, but it hasn’t been the best time to be in the market for a car. The auto industry has been plagued by shortages that led to sky-high prices for new and used vehicles. While short-term limitations have eased somewhat, the sector finds itself in the middle of several long-term, secular evolutions. Cars provide a case study on several of today’s biggest economic cross-currents.

The pandemic had a seismic impact on vehicle production. The average car has 30,000 parts, which come from a range of suppliers. Value chains and assembly lines are organized to tight tolerances, which were deeply disrupted by COVID-19. Social distancing and worker absenteeism affected labor; shipping interruptions hindered the delivery of components to factories. Circuitry was a particular problem, as chip demand driven by the transition to remote work made it difficult for auto makers to secure allocations.