With third-quarter sales being announced recently, what is clear and evident is no brand is immune to this. While Ford Motor Co. may dominate the headlines as one of the hardest hit from the shortage, it’s certainly not exclusive to the Dearborn manufacturer.
In fact, Ford put its own unique spin by taking note that its September sales increased 34% compared to August. So are things turning around when it comes to these inventory shortcomings and overall dip in profits for automakers?
Not so fast, says Ed Kim, vice president, Industry Analysis for Auto Pacific, an automotive industry research company.
“Unfortunately, the fallout from the chip shortage will be here well into next year,” Kim said. “The lead time for semiconductor chips can be up to nine months from the time the automaker or supplier orders them to the time they arrive, ready to be installed in the vehicle. With COVID-related chip production still hampered in many of the regions where they are made, it will be some time before chip supply is anywhere near normal.”
General Motors has also been hit hard and saw its sales volume dip to the lowest three-month period since 2009, when the company filed bankruptcy. According to a report in Automotive News, even Hyundai outsold GM for the first time in the company’s history. Hard times indeed.
Earlier this year, Americans received additional money in their pocket by way of a government stimulus bill. This usually spells good news for auto manufacturers as consumers flock to car lots in search of a great deal or looking to upgrade their current aging vehicle.
Kim said the microchip shortage has been brutal to automakers, making many of them miss golden opportunities to sell new vehicles featuring new technologies (like hybrids and electric vehicles).
“Since the spring, many consumers have had money to spend due to tax refunds and more stimulus money, but the automakers have simply been unable to produce the volume that the market demands. Many plants have had to shut down temporarily or reduce output,” he said. “Idle plants cost lots of money and there are a lot of those right now. It is extremely frustrating for automakers that consumers are ready to spend money on new vehicles, but they can’t supply them and are instead losing sales volume and losing untold revenues.”
“Cruising any auto mall reveals very little inventory on dealer lots, whether new or used — the latter due to many turning to used cars since new car availability is challenged,” Kim said. “In addition, consumers who want specific features or colors need to be flexible; these days, shoppers who must have a new vehicle need to be open minded to taking what’s available rather than be set on finding the exact spec they want.”
When it comes to sales reporting by auto manufacturers, you have to look past the gleeful spin they put on their releases. We rarely post about their sales reporting because of such things. However, right now it felt necessary to unspin the spin and truly get a feel for what’s happening and where things are going.
Sure, there’s a lot of new and exciting trucks coming like the 2022 Toyota Tundra, the Ford Maverick, Chevy Silverado ZR2 along with some new offerings for Ram 1500. And in the SUV world, there’s always new and exciting updates and offerings like the Ford Expedition, Jeep Grand Cherokee and Honda Passport.
Kim said, the microchip shortage definitely hindered what would have been a brisk outlook for 2021 and beyond.
“If not for the chip shortage, AutoPacific’s forecasters believe it is almost certain that auto sales this year and next would have topped 17 million units in the U.S. market. This year, the chip shortage will likely have cost the industry at least one million units, and it’s possible that could be even worse next year with 2022 CY sales dipping into the high 15 million unit range,” he said.
All consumers must show patience. Compromises may have to be made. If you wanted that special color on a Ram, or the hard top on the Bronco, you will either have to wait or make an exception.
This chip shortage is global and affects the entire manufacturing industry. It’s not exclusive to the automakers, although certainly they’re feeling the effects of it severely.
“The semiconductor chip shortage has had a profound impact on vehicle prices as well as vehicle and feature availability,” Kim said. “It is very hard to find a good deal on a new vehicle anywhere, particularly for SUVs and pickups that dominate vehicle sales in the US market because there are so few vehicles available.”
That’s the reality of today’s trucks and SUVs. You can overpay, compromise or just be patient.
I wish the choices were better than that, but for now, as the saying goes, it is what it is.