A car dealer shows the car to a customer at a dealer in Jersey City, NJ.
Angus Mordant | Bloomberg | Getty Images
Chase Weldon spent weeks researching new SUVs to fit his family. In amazement, it took him a long time to buy it. Many dealerships are hard to find, and salespeople who are sometimes overly aggressive won̵7;t call them back.
“I work with some dealers across the country,” said the 44-year-old Colorado. “I contacted 30 dealers … of those 30, half returned to me.”
Several salespeople who contacted said the car they were looking for had sold, or they refused to negotiate the price. “It’s definitely a different car buying experience,” he said.
That “different” experience can become the norm if dealers and investors have a way.
The shutdown of the plant since the beginning of spring was due to the coronavirus outbreak and is now happening as a global shortage of semiconductor chips has left the number of new vehicles available in the United States nosedive.
For consumers, a shortage means higher prices and more weeks spent searching or waiting for the vehicle they want. But for automakers and dealers, it has been translated to the broader, if not profitable, and even sales of vehicles before they arrive at dealerships.
Demand that outpaces supply
“Sales are faster than sourcing, and we think this will become tougher in the future,” said Michelle Krebs, executive analyst at Cox Automotive. “We expect these supplies to be tight throughout 2021.”
Strong shortages and strong-than-expected demand from consumers throughout the coronavirus outbreak have strengthened sales despite declining inventories.
The number of days of acquiring new vehicles in dealerships across the United States is 47, and is approaching the under-30s, according to Cox Automotive.Some pickups and SUVs are priced much lower, including single digits. According to the company, that compares to past supply days of at least 60 and higher for highly configurable vehicles such as pickup trucks.
Georgia-based dealer Mike Bowsher said the car stock at his four General Motors stores was only about 20 percent of what is usually due to shortages.
“We’re selling it into the pipeline,” he said.
Bowsher, who heads Chevrolet’s National Dealer Council, said he wanted to get more pickups. But the current profitability environment is not the same as what he has seen.
“Everyone’s going to make more money because from here on out, I don’t see it going back to pre-COVID-19 levels,” Sonic Automotive president Jeff Dike told CNBC, saying: “The whole football game. “There has been a change in the last year.
Publicly traded dealers such as Sonic and AutoNation recently reported record first-quarter profits. Dealers save money by holding less inventory and selling vehicles faster at higher average prices.
There’s no doubt there is more demand than supply and that’s the headlines in the field of new automobiles, ”AutoNation CEO Mike Jackson told investors last month. See improvements in our front end. Cease to grow “
Can it last a long time?
Carmakers have been trying to cut inventories for years to increase profits. But that’s harder than you think.
Brands reduce prices and incentivize vehicles to win customers. They also had to balance supply and demand with dealerships, many of whom begging popular models of trucks and SUVs as well as workers.
The latest contract between the Detroit-based automaker and United Auto Workers offers greater manufacturing flexibility. But laying out tens of thousands of factory workers can be costly. There is also the matter of worker retention and plant maintenance, which can take weeks to restart after shutdown.
Ford Motor CEO Jim Farley promised investors Wednesday that the company will operate smaller car inventories in the future, after reporting record pre-tax operating profit and able to beat expectations. Of Wall Street easily.
“I want to make everyone very clear, we will run our business with a lower supply than we had in the past because that’s good for our company and good for our customers,” he said.
One of the advantages for customers such as Weldon, whose vehicles is for exchange, is that dealers offer higher prices on the vehicles they use in the exchange.
The price of used cars increased as some consumers switched from buying a new car to a used car due to lack of stock and higher prices. It’s actually what Weldon ended up building with a salesperson at a nearby dealership for a used 2018 Toyota Sequoia SUV.
“I really got the car I wanted by educating myself … and diving into it,” he said. There is a word on how to find the car that I want. “
– of CNBC Michael Bloom Contribute to this report