Sonic Automotive also hit by chip shortage
Sonic Automotive was founded in 1997 and is based in Charlotte, N.C. As of Dec. 31, 2020, the company operated 96 new vehicle franchises, 14 collision repair centres and 16 EchoPark stores (its used vehicle division).
In its second-quarter fiscal 2021 results, the company reported total revenues of $3.4 billion (U.S.), from $2.1 billion the prior year driven by a $56million increase in new vehicle sales. Overall net income more than tripled to $114 million, compared to $31 million in 2020.
Given Sonic Automotive’s exposure to the new and used vehicle markets, it has both benefitted and suffered from the microchip shortage.
Dimitry Anastakis, L.R. Wilson/R.J. Currie chair in Canadian business history at the Rotman School and the department of history at the University of Toronto, notes that the microchip shortage is due, in part, to a lack of manufacturers.
“Part of the problem is that there are only so many chip manufactures and chip facilities in the world. There is a big lag (from the time orders are placed) and it is difficult to ramp up microchip production. In a way, it is easier to ramp up car production because there are more facilities around and more flexibility.”
Anastakis also noted a change in the industry from a growth and consolidation perspective. Leading up to and during the pandemic, automotive groups have been buying bricks-andmortar franchises to add to their network while expanding their online presence to cater to different markets.
Online sales have increased during the pandemic as health concerns deter people from visiting dealerships.
When asked about how much longer supply chain disruptions will continue, Anastakis explained that “it depends on COVID.”
However, he predicts that “by the summer of 2022, I think we will pretty much be back to normal in terms of people being able to get the cars they want.”