The U.S. has yet to return to pre-pandemic levels of transportation equipment manufacturing. In 2020 alone, the country lost 578,000 manufacturing jobs. Deloitte predicts that by 2030, the U.S. will have 2.1 million unfilled manufacturing jobs compared to 500,000 in 20202. Fewer workers to manufacture cars means that the U.S. is more heavily dependent on China for its car supply, leading to a national car shortage. A car shortage, in turn, makes the vehicles for sale more expensive. More expensive cars make auto insurance more expensive.
Broken Supply Chain
Another problem the pandemic has exacerbated is the lack of materials. The U.S. already divested from semiconductor manufacturing before the onset of COVID-19, with an 18 percent reduction from 2015 to 2019. When stay-at-home orders led to less driving in early 2020, many auto manufacturers canceled their semiconductor manufacturing orders.
Now, as a result, we don’t have enough of this vital car part as driving ramps back up. Due to this lack of semiconductors, the car shortage we mentioned is further complicated — it’s not just decreased labor contributing to the problem but a broken supply chain. The result, unfortunately, is the same: Car prices rise, and more expensive cars are more expensive to insure, as they have higher repair costs.
Higher Prices for Cars and Parts
Amidst these issues of securing labor and supplies, the cost of used cars increased by 19 percent from 2020 to 20213, while the cost of new cars increased by 47 percent4. The cost of car parts increased too. As a result of these COVID-induced problems, the higher car prices and car repair costs made insurance more expensive as well.