COVID-19 is among the top reasons why there is a car supply disruption. However, more than two years into the pandemic, we’re still in this predicament. The shortage has resulted in record prices for new and used vehicles (although used vehicle prices are starting to come down).
Why is there an Inventory Shortage of New Vehicles?
The market is currently experiencing a shortage of semiconductor chips. This has prompted car manufacturers to slow their production or even temporarily pause it in the last 2 years. At the beginning of the pandemic, car manufacturers erroneously anticipated that consumer demand for cars would significantly decline. As a result, they radically reduced orders for semiconductor chips which are needed in every car these days. When car makers realized that demand for new cars had not declined but rather increased, it was too little too late. All of a sudden, car makers were at the back of the line to receive these critical pieces of technology which are used in nearly all electronics such as our phones and laptops. But that’s not the end of it. What initially started as a chip shortage in the auto industry has now evolved into a global chip shortage affecting all industries. Even as economic activity has returned to pre pandemic levels, the chip shortage has persisted. Coupled with supply chain disruptions fuelled by post-pandemic pent-up demand and recent lockdowns in China, car makers are struggling to manufacture cars to meet demand.
What’s the Current Car Inventory Status?
Car inventory levels hit their lowest levels towards the end of 2021 since the 2008 global financial crisis. However, the needle seems to be moving ever so slightly in the right direction.
Car manufacturers are finding ways to deal with the chip shortage by selling most new cars via preorder and using less chips in their vehicles.
Is the Car Inventory Shortage Over?
In short, no. Asbury Automotive Group, amongst other powerhouse publicly traded dealer groups, anticipates that new inventory levels will continue to remain low in 2022. But there have been positive developments recently that supply chain disruptions and the global chip shortage which have plagued the auto industry for the better part of 2 years are showing signs of easing. Volvo’s CEO Jim Rowan announced that Volvo Cars’ semiconductor inventory is now “back at full supply”. The U.S. congress passed a bipartisan bill that will provide $52 billion in funding for U.S. companies producing computer chips to beef up local chip manufacturing and rely less on global supply chains. As such, most industry forecasters, including Cox Automotive, expect the chip shortage and other supply chain disruptions to gradually improve throughout the second half of the year.
How to Overcome the Car Inventory Shortage?
One of the best ways car dealers can overcome the current car shortage is by ensuring that marketing is in place for pre-order and that they have the necessary infrastructure to respond to an ever-changing market. It’s critical for dealerships to hone in on this now before it’s too late.
As dealerships look to build a flexible and dynamic tech business, there are two critical pieces to consider: automation and consolidation. Any technology should replace monotonous, manual legwork with real-time optimizations that can scale marketing and sales operations beyond any human capability. This is done best when coupled with a data consolidation strategy, making sure all dealership data sources hook into one hub for marketing execution.
Contact us today to discover how we can help you scale your business.
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