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“I worked with dealers across the country,” said the 44-year-old Colorado resident. “I contacted probably 30 dealers.… Of those 30, half answered me. “
Many sellers who responded to him told him that the vehicle he was looking for had already been sold, or they refused to negotiate the price. “It was definitely a different car buying experience,” he said.
This “different” experience can become the norm if brokers and investors do it.
Plant closures starting last spring due to the coronavirus pandemic and now occurring due to a global shortage of semiconductor chips have caused the number of new vehicles available in the United States to drop.
For consumers, the shortage has meant higher prices and weeks, if not months, of searching or waiting for the vehicle of their choice. But for automakers and dealers, it has translated into larger, if not record, profits and even selling vehicles before they reach dealerships.
Demand exceeds supply
The shortage as well as stronger than expected consumer demand throughout the coronavirus pandemic is keeping sales strong despite declining inventories.
According to Cox Automotive, the number of days of new vehicle supply on dealership lots across the United States is 47 and on its way to the low 30s. Some pickup trucks and SUVs are much lower, including single digit digits, depending on the company. This compares to historic supply days of at least 60, and more for highly configurable vehicles such as vans.
Georgia-based dealer Mike Bowsher said vehicle inventories at his four General Motors stores were only about 20% of what they are typically due to shortages.
“We sell it to the end of the pipeline,” he said. “When a truck arrives, 75% of the truck is already sold. “
“Everyone is going to make a lot more money from this from now on. I just don’t see it going back to pre-Covid levels, ”Sonic Automotive president Jeff Dyke told CNBC, saying“ the whole ball game ”has changed in the past 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 is no doubt that there is more demand than supply and that is the title on the new vehicle side, ”AutoNation CEO Mike Jackson told investors last month. end growth. ”
Can it last?
Brands reduce and encourage vehicles to compete with customers. They also need to balance supply and demand with dealers, many of whom are clamoring for popular truck and SUV models, as well as their workers.
Recent contracts between Detroit automakers and the United Auto Workers provide more flexibility in production, but laying off tens of thousands of factory workers can be costly. There is also an issue of worker retention and plant maintenance, which can take weeks to restart after a shutdown.
Ford Motor CEO Jim Farley promised investors on Wednesday that the company will handle lighter vehicle inventories going forward after reporting record pre-tax operating income and easily exceeding Wall Street expectations.
“I want this to be extremely clear to everyone. We are going to run our business on a lower days supply than we have had in the recent past because it is good for our business and good for the customers, ”he said.
Used car prices have increased, with some consumers switching from purchasing new vehicles to used vehicles due to lack of inventory and rising prices. That’s actually what Weldon ended up doing after establishing a relationship with a seller at a nearby dealership for a used 2018 Toyota Sequoia SUV.
“I got the car I wanted by just educating myself… and delving into it,” he said. “It was really about building a relationship with the seller.… I started to gain traction by at least having my say in finding the car I wanted.
– CNBC Michael Bloom contributed to this report.