The laws of supply and demand apply are simple, really, and they apply to everything, including cars. If their supply is low, as is the case now due to the global semiconductor chip shortage, and demand is high, because U.S. buyers are flocking back to dealerships, then prices grow.
Some U.S. dealers are calling it Camelot, but others aren’t so sure. Either way, at this relatively early stage in the chip shortage, profits for those who sell cars are high. Speaking to Reuters, Mike Bowsher, President of Carl Black Auto Group, said people are waiting more than a week and willing to pay full price for cars at his dealers.
“I’m selling about 150% of what I have on the ground,” said Bowsher. “We are selling stuff so far up in the pipeline that they’re putting money down on ‘in-process,’ which is in the plant.”
The combination has led to record profits for some dealers. AutoNation, America’s largest dealer network, saw profits nearly triple last week. Its rival, Lithia Motors, saw its profit per new vehicle margin jump 33%.
“I’ll take this till I’m six feet under,” Bowsher said. “Customers are coming in just saying, ‘I’ll take it, full sticker, get it ready.’ It’s nuts.”
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Although the Biden administration is taking action to try to alleviate the chip shortage, some see it lasting until 2022. That will no doubt please dealers like Marc Cannon, AutoNation’s executive vice president, who wondered if this could turn into the new norm.
But some aren’t so sure that the good times will last. Todd Skelton, CEO of Prime Automotive Group says he only had 62 cars at his dealership in mid-April, down from his typical 300. “We’re now beginning to see not only the depletion of what we had in stock, but nothing following behind it,” he told Reuters.
Others, like Jim Seavitt, who owns a Ford dealership in Dearborn, Michigan, point out that profits will only take you so far if there’s nothing to sell.
“They think it’s a light at the end of the tunnel, but it’s a freight train,” he said. “I’ve got 150 cars on the ground. I’ve got maybe 30 cars coming next week. I sell 225 a month. Why would I be rejoicing right now?”
