WHERE’S MY CAR?
Computer chip shortage has dealers, buyers struggling for vehicles.
Rick Ricart is expecting nearly 40 Kia Telluride SUVs to arrive at his family’s dealership near Columbus, Ohio, over the next three weeks. Most will be on his lot for just a few hours.
“They’re all sold,” Ricart said. “Customers have either signed the papers or have a deposit on them. The market is insane right now.”
In showrooms across the country, Americans are buying most makes and models almost as fast as they can be made or resold. The frenzy for new and used vehicles is being fed by two related forces: Automakers are struggling to increase production because of a shortage of computer chips caused in large part by the pandemic. And a strong economic recovery, low interest rates, high savings and government stimulus payments have boosted demand.
The combination has left dealers and individuals struggling to get their hands on vehicles. Some dealers are calling and emailing former customers offering to buy back cars they sold a year or two earlier because demand for used vehicles is as strong, if not stronger, than for new cars. Used car prices are up about 45 percent over the past year, according to government data published last week. New car and truck prices are up about 5 percent over the past year.
Those price increases have fed a debate in Washington about whether President Joe Biden’s policies, particularly the $1.9 trillion American Rescue Plan he signed in March, are responsible for the sharp rise in inflation. The government said last week that consumer prices across the economy rose 5.4 percent in the last year through June.
Republican lawmakers have argued that the March legislation is overheating the economy and are citing the rise in prices to oppose additional government spending. But Biden administration officials have pointed out that temporary supply shortages are largely responsible for the surge in prices of cars and other goods.
Government stimulus may have helped some consumers, but it is hard to say how much. There are several large forces at play.
The chip shortage, for example, is affecting automakers all over the world and is not directly related to U.S. policies. Industry officials blame limited production capacity for semiconductors and pandemic-related disruptions in supply and demand for the shortage.
To make the most of limited chip supplies, General Motors has temporarily done away with certain features in some models, such as stop-start systems that automatically turn off engines when cars stop for, say, a traffic light. And French automaker Peugeot has replaced digital speedometers with analog ones in some cars.
“The industry has had strikes and material shortages before that have left us short of inventory, but I’ve never seen anything like this,” said Mark Scarpelli, the owner of two Chevrolet dealerships near Chicago. “Never, never, never.”
His dealerships normally have 600 to 700 cars in stock. Now he has about 50. Once or twice a week, a truck arrives with five or 10 vehicles. The cars disappear quickly because of customer waiting lists, Scarpelli said.
Though the unemployment rate is still higher than before the pandemic, many people have money to spend. Government payments have helped lots of people, but many Americans, kept from vacationing or eating out, saved money. Financing cars is also relatively cheap — at least for people with good credit. Some automakers are advertising zero-interest loans on some cars.
Ricart’s family businesses include a custom shop that sells high-end, special-edition trucks and sports cars. “We had a $125,000 Shelby pickup, and I said, ‘Who’s going to buy that?’” he recalled. “The next day it was gone. There’s so much free cash in the market. People are paying full price, even for the most expensive vehicles we have.”
Dealers are selling fewer vehicles, but their profits are up a lot. That’s a huge change from spring 2020, when most dealerships shut down for roughly two months and had to lay off workers to survive.
“The strong demand from consumers paired with a lack of supply from the manufacturers has created a gusher of profits for dealers,” said Alan Haig, president of Haig Partners, an automotive consultant.
Now, dealers typically dictate the price of new or used cars. New cars typically sell for the manufacturer’s suggested retail price or, in some cases, thousands of dollars more for models in very high demand. Haggling over used cars is a distant memory.
“There’s not a lot of negotiating that goes on right now on price,” said Wes Lutz, owner of Extreme Dodge in Jackson, Mich.