Car industry slows plants, alters sales
Issues may change how people shop for vehicles
New car buyers can’t be as choosy as they used to be in today’s car market.
The ongoing computer chip shortage triggered by COVID-19 disruptions has sent the automobile industry into a tailspin that has caused car dealerships locally and across the country to experience inventory cutbacks — and may change how people shop for cars in the future.
German automaker Volkswagen is restarting a plant with only one shift next week because some of its supplies are so limited. Toyota said it would suspend production at more than a dozen plants in Japan over the next several weeks. BMW AG recently predicted ongoing uncertainty, and Ford, according to media reports, is leaning toward a model where customers order their cars and then wait several weeks to get them.
The shortages are impacting every step of the sales line, from new car dealers to used car operators to customers.
Guy Gearhart, co-owner of South Side Motors on East Carson Street, said with fewer new cars on the market to buy, there continue to be fewer people trading in their old cars.
“People like me who sell used cars can’t buy them at the auction, and the few that are at the auction are very overpriced because there’s so few available,” Mr. Gearhart said.
Starting earlier this summer, new car dealers with fewer vehicles on their lots have not been doing business as usual either. Customers who visit the showrooms might have to choose their car from a photograph rather than driving a model off the lot. They might get approved to buy the car and then wait for it to arrive from the manufacturer.
“I remember having 300 new cars to pick from on our lot. Customers could have their choice of colors and whatever equipment
they wanted. Now we have eight new cars,” said one Pittsburgh car dealer who asked not to be identified because he wasn’t authorized to speak to the media. “A couple of months ago, we only had one.”
The situation in local showrooms reflects the ongoing uncertainty seen across the industry.
VW’s Wolfsburg plant, the world’s biggest, employing some 60,000 people, will restart with only one shift next week Monday through Friday, Europe’s biggest automaker said. Audi, the group’s biggest profit contributor, will extend the summer break by one week at its two factories in Germany as semiconductor supply remains “volatile and tense.”
Many carmakers had warned in recent earnings reports that rocky months were coming after COVID-19 outbreaks in Southeast Asia forced restrictions at chipprocessing plants. VW last month flagged “really constrained” output during the third quarter.
Toyota will suspend output at 14 plants across Japan for various lengths of time through next month, succumbing to supply issues it had been navigating better than other manufacturers, thanks to stockpiles of chips and other key components. The impact will be most severe in September, with Toyota slashing its production plan by 40%.
According to research by Susquehanna Financial Group, the amount of time it’s taking for chip-starved companies to get orders filled has stretched to more than 20 weeks, indicating the shortages are getting worse.
While carmakers have been forced to dial back sales expectations, higher vehicle prices and a focus on major moneymakers have helped cushion the blow.
And it has some re-examining their overall strategy.
In recent weeks, the Wall Street Journal has reported that Ford Motor Co. is planning to shift more to a buildto-order model where customers order the vehicle they want and then wait several weeks for it to arrive at a dealership. Although the model could mean it only builds the vehicles that people actually want, it could also risk losing sales to rivals who have vehicles sitting ready to go.
But there aren’t a lot of those at the moment, which in turn keeps people driving their older cars longer.
Mr. Gearhart said there’s so much competition among used car dealers to buy what’s available that consumers are bound to feel it when they go shopping for a vehicle.
“Anyone buying a car priced from $9,000 to $17,000 can expect to pay from $1,500 to $2,500 more than they would have paid before the pandemic due to the shortage,” he said.