Vehicles in short supply
At this time in any other year, the lots at Diehl Toyota of Butler would be filled with 150 to 160 new vehicles.
But when Toyota sales manager Dominick Hillwig closed out sales for the month of June, the lot was nearly bare, with only 22 new cars ready for purchase.
“The surplus and backlog from COVID has just run out,” Hillwig said.
Diehl Toyota's situation is similar to that of many other dealerships around Butler County and around the world, as a supply disruption that kicked off a global shortage of computer chips at the beginning of 2021 is making new cars hard to come by.
Computer chips are necessary in a number of different functions in modern cars, including engines, transmissions, in-car technology like GPS screens and more. The shortage has persisted since the beginning of this year, making getting a new car a challenge for both dealers and customers.Normally, an increase in demand for cars would be a good thing, but as the pandemic comes to an end and consumer demand for new cars rises, some dealerships are struggling to provide product for customers.“The majority of people who come in are understanding, but some others come in and seem surprised that they can't get the car they want,” Hillwig said. “The overall volume is down, but automobiles are just like anything, when the supply is down, prices go up.”Many customers have shown a willingness to either pay more or wait.“We're sort of selling forward — we've had some people come in and hear that, OK, it will take six to eight months to get the car they want, and then they'll put down a down payment and come back later in the year,” Hillwig said. “Every individual's purchasing process is a little different, so if you just totaled your car, it's different than if you're just coming up on the end of your two- or three-year buying cycle.”
The chip shortage is affecting the global supply chain for cars, but some manufacturers have been hit harder than others, and some have taken a softer blow.Michael McGlumphy, sales manager at #1 Cochran Subaru of Butler County, said the worst may be behind his dealership.“Subarus are run at a lower supply of on-ground units than other manufacturers, but the demand is still very high — the highest it's ever been in the past few years,” he said.McGlumphy says that #1 Cochran Subaru is on pace with what they forecasted for this year in terms of sales.“There's obviously going to be a little bit of downside because inventory is low,” he said. “But it balances itself out. Maybe we're not selling that car today, but we will a month from now when it gets here.”He's found that customers understand best when he puts the situation in perspective.“You're going to have some people frustrated about it, and some people are just learning now that there is a shortage,” he said “But it's a global supply chain shortage, not just for cars. If you kind of relate to them that way, they tend to understand. You can ask a customer to drive to dealership to dealership up and down the street, and they're going to see the same thing.”Jon Palmiero, a partner at Honda North, said that his dealership has also stayed afloat.“Honda has been in a pretty good situation on our inventory up to this point,” he said. “There haven't been that many cases when we have been unable to provide.”For Honda North, the issue usually arises when a customer wants a specific color or package with a car that may not be available. Some cars are there, but customers may not have the variety they've come to expect.Like many other dealerships, Honda North uses a waitlist system for people who may want a car that is not yet available, and Palmiero says that customers have been relatively patient.“It's amazing how resilient both our employees and the consumers seem to be; We've been through a lot together,” he said. “People seem to be familiar with shortages everywhere, so the news that it might take a couple months doesn't seem too crazy.”However, he's noticed that other manufacturers have had more troubles.“The truck market has been a very difficult situation since the COVID shutdown, and it seems to be more affected than many other segments,” Palmiero said.
While used cars aren't necessarily as affected by shocks to chip supply, some say the effect of the shortage on the supply of new cars has “put the used car industry into a tailspin.”“We have dealers buying our vehicles online, paying more for what we have them listed for. I've been 30 years in this business and have never had anything this crazy,” said Tom Bertram, general manager of Ellis Automotive Late Models 4 Less in Lyndora. “We normally have about 130 to 140 cars on the grounds. Right now, I don't think we even have 40.”Bertram said that most of the sales he's been doing right now to customers are more out of necessity, which is unusual for this time of year.“It's people who either had an accident or had a car broke down. They need somewhere to get where they need to go,” he said. “Normally this time of year, it's want and desire, people who want to get themselves a new truck. Lately it's more out of need.”Other used car dealers haven't seen as much of a change in their sales.“It's hard to say — the market has been so volatile lately,” said Wayne Fisher of Lyndora Auto Sales. “It's just hard to determine what is going to happen.”
It's not clear when the shortage will end. Hillwig is optimistic that it may clear up in the second half of the year, and has been told that most of the improvements will happen in the last quarter of 2021.“Manufacturers are really behind,” he said. “It's a problem that's going to take months to correct.”McGlumphy feels that his dealership is as confident as they can reasonably be right now that the supply chain will work itself out eventually.“The demand is the biggest thing that we focus on, and we're still selling cars, we're still taking in trades, we're still servicing cars,” he said. “With the opening of things, people are starting to travel more, so the demand in the industry is up. Some may tell you it's depressing and worrisome, but I think it's an exciting time to be in the car business.”
