Car dealerships affected by semiconductor chip shortage
Santa Barbara is not exempt from the international car shortage, a problem caused by the lack of semiconductor chips that are integral in today’s automobiles.
New vehicle inventory was down 36% in March 2021, according to Edmunds, an online automotive resource based in Santa Monica.
Doug Connor, owner of Santa Barbara Nissan, describes the situation as this: “The demand is there, but the cars are not.”
Because the dealership has plenty of traffic, he has been able to sell cars close to or at the manufacturer’s suggested retail price with minimal negotiation.
He likes to keep his lot full of around 150 cars, a mix of used and new. But, now, he has less than half of his usual stock. He sees the same problem in other dealerships he drives past.
Local dealers, encouraged by an increase in demand, don’t talk about the situation in dire terms. It puts a stress on business, but dealerships are selling more vehicles than they did last spring.
Nearly 18.4 million vehicles were sold in March, according to the U.S. Bureau of Economic Analysis. That volume of sales was last seen in August 2015 — the peak of a rising car market after the 2008 recession.
The number of sales has been increasing since a low in April 2020, when just 9 million vehicles were sold. Prior to the pandemic, monthly sales volume averaged about 17.5 million.
Used cars are especially in demand, Greg Myers, sales manager at Santa Barbara Honda, told the News-Press.
“The used cars are selling off the shelves and are depleting the inventories. In the meantime, we’re in a good position with the new cars,” he said.
Kelley Blue Book, an industry standard car valuation, has bumped up the values of used cars in Santa Barbara to almost match the retail price of new cars.
The average trade-in value hit an all-time high in March, according to Edmunds. Dealers paid an average of $17,080 for trade-ins, up from $14,160 in March 2020.
“The chipset shortage is wreaking havoc on new vehicle production, but we’re also seeing surprisingly healthy car shopper demand, which has likely grown stronger in light of vaccines rolling out quicker than anticipated,” Jessica Caldwell, Edmunds’ executive director of insights, said in a news release. “These two factors combined are disrupting the market in a way we haven’t ever really seen before.”
Trucks, sports cars and SUVs are in highest demand currently.
Mr. Myers said Ridgelines, Honda’s pickup truck, has been popular — despite Honda not being known for its trucks.
“We have seen, believe it or not, a lot of Ridgeline action. (Honda) made some changes to the front end of that truck, and people have been going crazy for it.”
He chalks it up to new design, but trucks have been popular in general.
Honda Ridgelines from the model year 2018 have retained 70% of their value upon trade-in, according to Edmunds.
“Many consumers believe the old adage that you lose half the value of your vehicle when you drive off the lot, but that is simply far from the truth today. In fact, we’re seeing many vehicles hold a huge amount of value multiple years into ownership,” said Ivan Drury, Edmunds’ senior manager of insights.
Heavy-duty full-size trucks with a 2018 model year are worth 77% of retail cost; 2018’s luxury sports cars retained 65% of their value, and mid-size SUVs are worth 61% of their original retail when traded in.
Mr. Connor has noticed more demand for preowned cars than new inventory.
“Everybody in the world seems to be trying to buy them right now,” he said. “I usually have quite a bit more inventory in used cars, and that supply is getting short.”
He expects even more demand as the weather heats up, as summertime is his busiest season.
He sees his inventory “dwindling out,” making him a little nervous about summer.
“I’m hoping that this whole chip shortage is short-term,” he said.
Experts nationwide see the problem continuing, with projections extending into 2022. For now, the issue is not affecting demand.
“In the U. S. of A., people like changing cars around a lot, and they still want to do it,” Mr. Connor said.
In recent news, the semiconductor chip shortages are also affecting computer and cell-phone manufacturers, including Apple.