New drivers may never have to learn how to parallel park. At least not the old-fashioned way. Many new cars—a Ford Mustang Mach-E, a BMW sedan, a Tesla Cybertruck—will just maneuver into a spot for you with a click of a button. Even a decade-old Toyota Corolla has a backup camera and pedestrian detection. Cars that leave you to park all on your own are a dying breed: Any car manufactured after April 30, 2018, for sale in the United States is legally required to have a backup camera and, thus, a screen.
After all, cars are just computers now. The screen (or really, screens) in today’s vehicles does a lot more than display rearview footage. It is essentially a tablet wedged into the dashboard that allows you to mirror your phone through Apple CarPlay, make a hands-free call via voice commands, Zoom into a work meeting, or even play a video game (not recommended). Mercedes-Benz debuted a 56-inch display in several models that it calls the “hyperscreen.”
But the expectation, and in some cases, the requirement, that cars have an ever-growing set of electronic features comes with a cost. Just like laptops, cars depend on microprocessors and RAM, or random access memory, to run all of their computations. “There’s just a baseline level of tech, and thus a baseline level of cost, required of every vehicle,” Karl Brauer, the executive analyst at iSeeCars, an automotive-research platform, told me. Technology is a major reason the average price of a new car in the U.S. has reached some $50,000, and that was before RAM became one of the most prized commodities in the world. AI companies are snatching up as much memory as possible for their data centers, causing a RAM shortage that has significantly raised the prices of phones, laptops, and just about any consumer-electronic device. Cars are next.
The problem runs much deeper than a screen. Cars started morphing into computers in the 1970s, when new emissions standards made electronic systems necessary to manage ignition and fuel injection. There’s been a gradual software creep ever since: power windows, adaptive cruise control, antilock brakes. Regulators now rate cars based not just on how they do during a crash, but also on how well their electronic safety systems avoid a crash. “We’ve evolved every single component of the vehicle to involve a semiconductor,” Ivan Drury, the director of insights at Edmunds, told me.
More recently, Tesla in particular has played a big role in pushing the auto industry to stuff vehicles with even more digital technology. Without parts such as pistons and fuel lines that make a gas-powered car move, electric vehicles are run by a computer that regulates their battery and motor. It’s no coincidence that Tesla helped popularize the giant in-car touch screen. Today’s new cars, electronic or otherwise, have driver-assistance features, receive over-the-air software updates, and can even load ChatGPT. BMW advertises the ability to have a distinct climate-control setting for every passenger and the option to install screens into seat backs, airplane-style.
In most vehicles on American roads, all of this software is controlled by hundreds of separate electronic units throughout the car. Features such as antilock brakes and lane-detection sensors don’t need all that much processing power, and they can be operated by chips that might account for 5 to 10 percent of a vehicle’s materials cost, Sam Abuelsamid, an analyst at Telemetry and a former automotive engineer, told me.
Again following the lead of EV start-ups such as Tesla and Rivian, legacy automakers are shifting from these ad hoc, tiny control units to one or two big computers that run all of the software in their vehicles—and, in turn, require much more RAM. These central computers allow for a streamlined supply chain, seamless software updates, and a faster internet connection, plus, as General Motors advertises, they will be ready for “future AI workloads.” You can’t really build a car that safely and reliably drives itself with a collection of puny computer chips. Such centralized computers need more advanced automotive microprocessors from Nvidia or Qualcomm and might eventually account for 20 percent or more of a vehicle’s cost, Abuelsamid said. That was before the AI-fueled memory shortage. In other words, cars are becoming more software-heavy and dependent on memory chips than ever, right when those chips are in high demand from tech companies willing to pay premiums that automakers cannot afford.
Over the next year, the memory shortage—sometimes known as RAMageddon—will likely raise vehicle prices by a few percentage points, on average, Abuelsamid said. The relative amount would be smaller than the shocking double-digitjumps for gaming consoles and MacBooks but in some ways more significant: A 4 percent price hike for cars amounts to some $2,000 on average. Cars with those centralized computers will be affected the most, but no vehicle will be spared. “Even if you don’t need the high-end chips, you’re going to pay more even for the low-end chips just because of the supply constraint,” Abuelsamid said. On a recent earnings call, Ford’s chief financial officer said that the company had $1 billion in higher materials costs due to the memory shortage and inflation. GM and Volkswagen, too, have noted rising chip costs to investors. (Ford and GM did not respond to a request for comment. A spokesperson for Volkswagen told me that the company has “recognized an increased demand for memory chips, primarily driven by growing requirements in other industries,” and that in recent years, Volkswagen has taken measures to “mitigate supply risks.”)
RAMageddon is poised to last for several years, but the consequences for car buyers may be permanent. Consider what happened during the pandemic, when supply-chain disruptions and rising demand for electronics produced a major chip shortage. Nearly every major car company had to slash production because they simply couldn’t procure enough chips, and shifted their focus to selling higher-end and higher-profit vehicles. Potential customers already willing to spend six figures on a car are much less likely to care about a 5 or 10 percent price hike, Drury said. Even now, car companies are continuing to focus on selling more profitable models. Since the pandemic, the average price of a new vehicle has jumped $11,000.
The AI-fueled chip crisis could play out more severely. The average price of a new car could, before long, rise to $60,000 and beyond. These rising costs are making cars even more similar to computers and all of the software they run: Perhaps in an effort to mitigate higher prices, some automakers are also introducing in-car advertisements and putting certain features, such as heated seats, behind a paywall. As cars have morphed into computers, the inevitable next step is for automakers to behave like modern tech companies.
Most Americans cannot afford a $60,000 new car, let alone a $50,000 one. When new-vehicle prices soar, the used-car market follows. That has been one durable consequence of the pandemic’s chip crisis: The average price of a three-year-old used car is up $9,000, or nearly 40 percent, since before the pandemic. To get the same prices, Americans already have to buy much older cars that have far more miles on them. If automakers continue to shift their focus to designing cars with more software, more screens, more self-driving features, “that increasingly prices people even out of the used-vehicle market,” Abuelsamid said. It’s one thing for the AI industry’s appetite for memory chips to raise the price of an Xbox, or even a new laptop. But the stakes are much more consequential when it becomes harder and more expensive to get groceries, pick the kids up from school, and go to work.
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