We’ve been instructed for the final two years that, “it can worsen earlier than it will get higher”, however at what level do you increase the white flag and acknowledge that we’re going through an automotive disaster by no means seen earlier than? The provision chain woes and chip shortages have made headlines for properly over 18 months, and whereas supplier inventories have been extraordinarily low, the market has continued to maneuver alongside, leaping over one hurdle after one other, however as we head into the summer time of 2022, producers, sellers, and customers are going through challenges that can inevitably disrupt gross sales and car availability for the foreseeable future.
How unhealthy are the shortages? Nicely, right here’s the state of affairs for Honda.
To start out the month of April, Honda had 18,000 items on the bottom in america for patrons to purchase, which this alone is nowhere shut to satisfy demand, nevertheless it’s gotten worse in Might with solely 12,200 new automobiles on stock. Mike Kistemaker, Honda’s assistant vice chairman of gross sales mentioned.
“Which suggests there have been solely 11 Hondas on the bottom on the common retailer and a three-day provide.”
Available in the market for a CR-V or Civic? Good luck.
“Completed with a one-day provide and switch charges properly over 90 %,” Kistemaker mentioned. “I’ve by no means seen a one-day provide of our product.”
A one-day provide implies that sellers solely have sufficient CR-V’s and Civics to final a day; basically making it not possible to search out both car on the brand new market, and for those who do find one, you’ll be pressured to buy the minute you stroll into the showroom. To place all of this into perspective, ideally you desire a 30 day provide, and a few manufacturers earlier than 2020 had sufficient stock to final near 2 months. Producers up thus far had been hovering round 10-15 days, which isn’t the perfect situation, however no less than you’d have automobiles to select from.
Honda isn’t the one producer coping with provide points. Kia, whose managed to in some way have automobiles on the bottom are starting to really feel the consequences.
“We proceed to have challenges with manufacturing and distribution of our automobiles,” mentioned Eric Watson, head of U.S. gross sales for Kia. “Our supplier inventories proceed to be at historic lows, someplace between seven and 9 days’ provide of automobiles on the bottom.”
Toyota can also be in the identical boat, as they solely have 13,800 automobiles distributed amongst it’s 1,500 Toyota and Lexus dealership places.
Even when the provision chain points and chip shortages have been resolved in a single day, the consequences of the final 18 months are going to be felt for fairly someday, as used automotive costs will preserve their excessive resale values, and for the following few years these shortages will then create a scarcity of provide on the used market, as we’re now in a car deficit properly into the tens of millions, as factories aren’t producing sufficient automobiles to satisfy the demand right this moment or into the close to future.
To say we’re in uncharted waters can be an understatement, and for the time being reduction isn’t going to be on it’s method for some manufacturers till the 4th quarter of this yr on the earliest.