Microprocessor shortage is eating away at car dealership inventories
A supply shortage for a physically small device – the microchip – has posed big production challenges for some automakers in recent months, and several northern Michigan car and truck dealers are noticing its impacts as they research to align their stocks.
“We really struggle with that, and I think all dealerships are,” said Charlevoix Auto co-owner and general manager Bob Seitz, whose dealership sells the Chevrolet, Chrysler, Dodge, Jeep and Ram brands.
As USA Today recently reported, a shortage of microchips – which have played a critical role in the growing computerization of car and truck functions over the past decades – has affected several markets since mid-2020.
Amid the COVID-19 pandemic, chip factories began closing early last year, especially overseas, where the majority of processors are made. By the time they started to reopen, they had a backlog of orders to fill.
Home orders have led to an increase in consumer electronics sales, stifling auto parts suppliers who use chips for computers that control accelerator pedals, transmissions and touch screens. Chipmakers have stepped up the pressure by adjusting production lines to better serve the consumer electronics market, a much bigger source of revenue for them than automobiles.
After eight weeks of a pandemic-induced shutdown in the spring of 2020, automakers began reopening their factories earlier than they had anticipated. But then they were hit with unexpected news: chipmakers weren’t able to quickly flip a switch and make the kinds of processors needed for cars. Some predict that the recent disruption to traffic along a key international sea route – resulting from a large freighter blocking for several days in the Suez Canal – could further complicate the flow of microchip supplies.
For automakers, responses to shortages have included shift cancellations, temporary plant closures, and the assembly of some models without the installation of certain processors, with these units typically reserved for retrofitting once the necessary chips are available.
The production successes came at a time when dealerships such as Charlevoix Auto – which opened last year at a former Fox Motors chain location – were seeing increasing demand for cars and trucks.
Seitz said the flow of new vehicles to his lot from Stellantis – a company created by the recent merger of automakers Groupe PSA and Fiat-Chrysler, parent company of the Chrysler, Dodge, Jeep and Ram brands – has failed. showed significant disturbances. However, Chevrolet product selections – especially for trucks and full-size SUVs that are traditionally good sellers at the Charlevoix dealership – have been rarer than usual lately. At one point in early April, Seitz said the dealership had two new full-size Chevrolet trucks in stock, compared to the dozen or more that would likely be available amid typical industry production.
Some auto watchers have also reported signs that the impacts of the microchip shortage are rippling through the used car market as well, as some consumers seek alternatives to newer models in short supply. With a strong demand for used vehicles at Charlevoix Auto, “it has been very difficult to acquire inventory,” said Seitz.
With used vehicles at high auction prices recently, Seitz said the dealership is working hard to get units from local sellers. In one regard, he said the supply situation had been helpful in pushing slower selling inventories forward, and buyers of additional cars tended to be aware of the issues facing the industry and ready to move forward. adapt from preferred color choices and options.
“The clients have been super flexible,” he said.
At Subaru By-The-Bay in Bay Shore, owner Ryan Bremmeyr said signs of the supply chain challenges facing the auto industry are becoming a little more visible as spring sets in.
The dealership had a huge selection of new Subarus available in the first two months of 2021, Bremmeyr said in early April. The choices available to customers have since started to shrink, amid a recent record sales pace for Subrau By-The-Bay and signs of slowing production.
Turning to the middle of the year, Bremmeyr said he understands Subaru will prioritize the microchip supplies available for use in models like the Outback and Forester in the weeks and months to come. which should help the dealer maintain the selections of these popular lines. For customers looking for low-volume models, it might not be as easy to find their first choice of color or trim level.
“If you are looking for something a little different it will be a little harder to find,” said Bremmeyr.
Bill Marsh Jr., a partner with the Bill Marsh Auto Group – which operates a Ford outlet in Gaylord as well as multi-brand dealerships in Traverse City and Kalkaska – said the biggest impacts of the parts shortage of the industry for his business have tended to involve inventories of popular truck models such as the F-150 and the Ford Ranger.
“It’s not like we don’t have any product,” he said. “We are just forced.”
Among the various manufacturers represented by its dealers, Marsh said Ford stocks appear to have tightened the most amid the trend, followed by those of GM products and, to a lesser extent, Stellantis and Hyundai.
Marsh said the dealership group is fortunate to have a strong supply chain for used vehicles – many of which are trade-in – and said recent market trends offer a bright spot for drivers. looking to trade in for a different vehicle.
“People’s jobs are worth more than they normally would be,” he said.
At Fletch’s GMC Buick Audi in Petoskey, General Sales Manager James Skop said industry supply chain challenges were also showing different impacts for the lines the dealership offers.
Inventories of full-size trucks and GMC SUVs – which make heavy use of inefficient CPUs – have been relatively tight and have been rapidly replenishing lately, Skop said, adding that he had heard indications that General Motors would recall production of certain other GMC models to prioritize parts available for use in highly profitable lines like these.
For Fletch, the impacts on inventory at Buick – whose SUV lineup is primarily assembled overseas and tend to involve longer shipping times to dealerships than some other GM products – and the Audi brand have been. less noticeable, Skop said.
For vehicles with limited selections, Skop has said that exchanging units between dealers is a method that can sometimes help ensure a desired specification for a customer. He added that ordering a vehicle with preferred attributes is another available option, and added that some customers have generally shown a willingness to adapt to the choices available in the field.
“I think a lot of people are aware of the situation,” he said.