With just 1.9 million new cars available, demand for new cars in the United States is nearly outpacing supply.
Over the next few months, car dealership owner Charlie Gilchrist hopes to sell most new cars he can get from the manufacturers, at higher prices.
Due to a global shortage of computer chips, manufacturers have had to reduce demand, resulting in fewer new vehicles on the market. Demand has risen as a result of fewer new vehicles being produced.
Normally, with higher demand, dealers like Gilchrist could sell more cars if they had more to sell. Despite the increased pricing, which has increased by about 10% in the last two years, demand continues to outstrip supply.
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“It’s pretty obvious when you drive into our lots that there isn’t a lot of selection,” said Gilchrist, whose dealerships sell everything from GM and Ford to Nissan and Volkswagen. “Due to a severe shortage of inventory, our (sales) volume is declining. During the next two or three months, it will continue to fall.”
According to the government, the rise in auto prices across the board contributed significantly to the increase in consumer prices in the United States last month. In reality, a 10% increase in used vehicle prices accounted for roughly one-third of April’s overall increase in consumer prices, which was the largest monthly increase in more than a decade.
From now until June, Ford plans to produce half as many vehicles as normal. Some cars and smaller SUVs have been halted in manufacturing, and computer chips have been diverted to higher-profit pickup trucks and large SUVs by GM and others. Leading automakers have issued a profit alert.
The vehicle scarcity and the soaring prices can be traced to the eruption of the coronavirus 14 months ago. As the virus spread, auto factories shut down for a couple of months. With millions more people working from home, demand for laptops and monitors led semiconductor makers to shift from autos to personal electronics. Soon, though, a faster-than-expected economic rebound boosted demand for vehicles, and auto plants tried to restore full-scale production. Yet chip makers couldn’t respond swiftly enough.
With production slowed, dealer inventories shrank. Now, as the chip shortage has persisted, the shortage of new vehicles has worsened, and analysts foresee no return to normal before next year.
Yet so far, automakers have been earning big profits even with a depleted inventory, largely because many buyers. This is a brief summary.