Trade Talk Blog I
f you’re looking to purchase a new vehicle in the United States right now, your best option would be to import it. That’s because the current market has made it difficult for domestic automakers to produce cars in the amount that consumers want.
There are three external factors that have unfavourably impacted the North American automobile production industry since 2020. First came a global pandemic, then a supply chain problem, and now the Russian invasion of Ukraine. Let’s look at how each impacted the production of vehicles in the United States and why that makes importing the best choice for owning a vehicle.
1. The COVID-19 Pandemic
The automotive industry is a key component of the American economy. The sector employs millions of people, generates billions in revenue, and contributes to the growth of many other industries.
U.S. vehicle production and sales were greatly affected by the pandemic. During the first lockdown of COVID-19, U.S. automobile production was halted for nearly six weeks between April and May 2020. This led to a shortage of vehicles and resulted in longer waiting times for new vehicles.
Moreover, industry employment fell from 245,400 workers in February 2020 to just 120,300 workers in April 2020. This meant fewer vehicles were produced in the United States during the year.
2. Supply chain shortages of semiconductors
U.S. consumers constantly demand more vehicles with advanced safety and luxury features – using technologies that require semiconductor chips to work. And the global shortage of semiconductor chips has significantly restrained vehicle production in the U.S. and abroad.
Throughout the lockdown, automotive manufacturers anticipated reduced automobile demand, so they cut their semiconductor orders. At the same time, demand for chip-heavy products such as laptops, mobile phones, and servers increased.
When the automotive market recovered more quickly than expected in the second half of 2020, semiconductor production lines had already been switched to produce chips for the other products that had maintained growth throughout the year. Again, this resulted in shortages of U.S.-manufactured vehicles and opened the door for importing vehicles.
3. The Russian invasion of Ukraine
Russia’s unprovoked and unjustified invasion of Ukraine in early 2022 has also disrupted global supplies of several important materials used to produce automotive components. Russia is a major producer of aluminum, palladium, and nickel used in auto parts. And Ukraine is the largest global supplier of neon gas, which produces semiconductors.
Russia’s continued interference with global supply chains resulted in manufacturers finding it difficult to source these materials locally or internationally. These disruptions put pressure on domestic manufacturers who rely on these materials to produce their products at home. They also resulted in a spike in prices for aluminum, palladium, nickel, and neon gas – all of which have become a burden on U.S. auto manufacturers.
Ultimately, this reflected higher prices for U.S.-made cars, making importing vehicles a better option.
So, what makes importing vehicles appealing?
There are many reasons why vehicle imports hold such appeal.
- You won’t have to compromise on features. Imports from countries like Germany and Japan offer a fascinating blend of modern performance and classic flair, all at prices that wouldn’t be possible if the vehicles were manufactured solely in the United States. Imagine importing a European-style vehicle with Japanese technologies at a price that wouldn’t normally be possible.
- You can get more car for your money because of the favorable exchange rate. The current exchange rate is $1.29 US for every $1.00 Canadian dollar, which is nearly a 30% discount purchasing a vehicle in Canada vs in the United States. Importing a vehicle from Canada will, ultimately, save you thousands of dollars.
- There are more options available to choose from. Domestic manufacturers have limited offerings when it comes to certain types of vehicles like SUVs or pickup trucks — but not so much when it comes to imports from Europe or Asia. Those vehicles tend to offer more options such as color schemes and trim levels that may not be offered domestically (or at least not at such prices).
Are you considering importing a vehicle into the United States? Book a meeting with one of our Trade Experts today! We’ll be happy to provide you with more insight, help filling and submitting the required forms, and ultimately a smooth vehicle importation process.