What Semiconductor Delays? New Car Deliveries Now Held Up By Railway Shortage

The auto industry faces a new challenge as a shortage of railroad cars is causing delays in new vehicle deliveries. This shortage has led to at least 70,000 new vehicles being stranded across the country, unable to reach dealerships. The problem has prompted the Alliance for Automotive Innovation, the auto industry’s lobbying group, to ask the US Surface Transportation Board to intervene.

The shortage of rail cars is particularly concerning because freight rail typically moves almost 75 percent of new vehicles and carries 1.8 million carloads of auto parts each year. The backlog of finished vehicles is disrupting the automotive supply chain, which is still recovering from the semiconductor chip shortage. The delays in delivering vehicles are having a significant impact on suppliers, employees, and the U.S. economy as a whole.

The problem is the shortage of autoracks, the specialized rail cars that carry vehicles. Rail is preferred over carrier trucks due to lower costs and faster delivery times. An autorack rail car can carry 12 to 18 vehicles, compared to a truck hauler that can carry a maximum of seven to eight vehicles.

The shortage of rail cars is a complex matter due to the vast network of rail in North America and the intricacies of rail shipping. Rail shipping involves multiple destinations and routes, making it a complex puzzle to coordinate. Autoracks are part of a shared pool administered by a company called TTX. Manufacturing new autoracks takes two to three years, which is not a quick fix.

The origin of the problem is a combination of factors. Most notably, the rebound in new-vehicle production after the semiconductor chip shortage has outpaced the forecasts of most railroads. Additional problems have come about due to changes in supply chain patterns, such as routing vehicles through west coast ports instead of the east coast, resulting in longer rail car journeys than anticipated.

Meanwhile, several automakers are still dealing with the fallout of the microchip shortage. Earlier this year, Volkswagen indicated that the chip shortage will continue to impact car sales in 2023 and automakers including Cadillac, Ford, and Genesis have indicated that the shortage has led them to limit or exclude popular features on some of their vehicles.