A worldwide semiconductor chip shortage that has impacted sales of electronic devices ranging from smartphones to video game consoles, is throwing a wrench into the automobile manufacturing industry.
Nowhere is this more visible than at car dealerships; large lots which used to host a magnitude of new and used vehicles have been pared down significantly from their usual capacity.
Chris Foley, general sales manager for Midland Toyota, stated that despite having about 40 vehicles on the lot (capacity is 60), the dealership is managing to sustain viability.
“I was worse off a month and a half ago,” said Foley. “It’s not as bad now, but there are still some products that are short.”
The Midland Chrysler dealership normally has between 160 to 200 vehicles during average sales seasons, while currently they are sitting with roughly 30 new and 50 used vehicles available on the ground.
According to David Clayton, used vehicle sales manager for Midland Chrysler, used vehicles up to three years old are also difficult to obtain as sellers don’t see a reason to sell if there’s nothing new to purchase for replacement.
“We can’t get a whole lot worse, as far as inventory is concerned. We’re hoping that for a best-case scenario, we see an end to this over the next two- to three- months,” Clayton said.
Supply chain management for the entire semiconductor market has been in turmoil since the start of the pandemic, based on several factors including the limited number of factories to create the chips, health management practices, workforce shortages and stability in the workplace, and even climate change.
“The plant that makes our Tundra is in Texas,” described Foley. “Back in winter they had that snowstorm, which they never have.” The Texas governor went on to ask the Toyota plant to shut down due to power shortages, to put priority on heating people’s homes.
“So I’m not going to say it’s just the chip shortage. There’s still all sorts of other… I’m going to call them ‘COVID factors’,” Foley said.
Clayton admitted the changes made to selling vehicles as a result of the pandemic have also allowed the dealership to weather through the superconductor shortage without having to let staff go.
“Over the course of the last two years, I take nothing for granted at this point,” Clayton added with a laugh. “Just take it one day at a time, make adjustments to the market as necessary; we have to constantly be paying attention to it.”
Increases in trade value and used vehicle prices have surprised Clayton, who said it was the first time he’d seen such an occurrence in his history as a dealer.
“People’s vehicles are worth more now than they have been three or six months ago. It’s been a very weird year for this.”
Efforts are being made to catch the supply up to the demand, made easier by some semiconductor manufacturers, such as Intel, who have the ability to create the hardware chips in-house rather than outsourcing from other makers and countries.
Foley stressed that purchasing a vehicle should be experienced much like going to a restaurant, further comparing how a person walking in cannot instantly get what they want, whereas those who call ahead to pre-book reservations will have what they want when they arrive.
“Unless they pick up the phone and call us, they’re not going to know,” explained Foley. “If they call, I’ll say: ‘Hi, sorry, the one outside is sold, someone ordered it a couple of weeks ago. If you want one, we can get one in for you, and what colour do you want?’”
“My expectation is that between Christmas and New Year is when we’re going to see things lighten up with the inventory levels,” Clayton reiterated.