In normal times, that would be cause for joy. Not so much now. A global shortage of computer chips has forced automakers to slash production. The result has been far fewer vehicles on dealer lots, just as the waning pandemic has fueled a pent-up consumer demand for cars, trucks and SUVs.
Given the robust customer demand, dealers like Gilchrist could sell many more cars and trucks, if only they had more. Even at elevated prices — the average new-vehicle sales price tops $40,000, up nearly 10% in two years — customer demand exceeds supply.
“It’s pretty evident when you pull onto our lots that there’s not much selection,” said Gilchrist, whose lots carry brands ranging from General Motors and Ford to Nissan and Volkswagen. “Our (sales) volume is falling because of the sheer lack of inventory. It will still fall during the next two or three months.”
The across-the-board surge in auto prices contributed mightily to last month’s jump in U.S. consumer prices, the government reported Wednesday. A record 10% increase in used vehicle prices, in fact, accounted for roughly one-third of April’s overall rise in consumer prices — the sharpest monthly increase in more than a decade.
Ford expects to produce only half its normal number of vehicles from now through June. GM and others have resorted to halting production of some cars and smaller SUVs and diverting computer chips to higher-profit pickup trucks and large SUVs. Leading automakers are warning of diminished earnings.
The vehicle scarcity and the soaring prices can be traced to the eruption of the coronavirus 14 months ago. As the virus spread, auto factories shut down for a couple of months. With millions more people working from home, demand for laptops and monitors led semiconductor makers to shift from autos to personal electronics. Soon, though, a faster-than-expected economic rebound boosted demand for vehicles, and auto plants tried to restore full-scale production. Yet chip makers couldn’t respond swiftly enough.
With production slowed, dealer inventories shrank. Now, as the chip shortage has persisted, the shortage of new vehicles has worsened, and analysts foresee no return to normal before next year.
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