Chip storage is creating a new car desert. Dealerships pushing used cars instead.
STAUNTON — Matthew Walsh said normally there would be up to 2,200 cars on the lots at the 15 Carter Myers Automotive dealerships in the state. Now, they have a total of 363.
“That makes it hard for us to provide selection for customers and typically, if you were buying a car, you’d come in and you could test drive three or four different models of say a Honda CRV. Now … we may not even have a CRV on the ground to show you,” he said.
Carter Myers Automotive (CMA) has a total of 15 dealerships — in Staunton, Charlottesville, Colonial Heights, Williamsburg and Winchester — selling a variety of cars including Honda, Volkswagen, Nissan, Dodge Jeep Ram, Subaru, Kia, Hyundai, Chevrolet and Ford.
According to Car and Driver, a semiconductor chip shortage is affecting the price of used cars and the supply chain of new cars. The semiconductor chips, which have a microchip processor, are important because it can control everything from screens to fuel management and stability control, according to ConsumerReports.org. The demand for these chips rose during the COVID-19 pandemic and the shortage is expected to last until next year.
Manufacturers sold more than 14 million vehicles in the U.S. in 2020, and more than 17 million the year before, creating a need for hundreds of billions of microchips annually.
New car sales for June across the country were down 14% compared to 2019, according to Black Book.
Walsh, who is vice president of operations at Carter Myers Automotive, said it’s been a challenge. It’s also creating a dent in their sales — a decrease of 30% in new car sales.
“Our new car sales go from about 1,000 (cars) a month down to on the 650 or 700,” Walsh said. “Our total sales might be down, 8 to 10%, our new car sales were down 30%, maybe 35%, depending on the month.”
So, the company, like many other car dealerships, has had to pivot to selling used cars.
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Normally, Walsh said for every 10 new cars they’d sell seven used cars. Now, it’s closer to one to one.
“We’ve really elevated our used cars volume, to make up for that,” he said.
According to Car and Driver, June was the first month that the shortage affected sales.
As of Aug. 17, wholesale values declined for the seventh week in a row, according to Black Book, but sales rates increased as sellers adjusted floors in reaction to the softening market. Despite the larger than seasonally expected weekly declines, values of used vehicles across all segments remain at historically high levels, Black Book said.
Black Book said retail demand had slowed down at the end of 2020, making retail asking prices decline the last few week of that year. As demand increased, retail prices were still lagging behind wholesale prices, except in March, which had an accelerated growth in retail prices, Black Book said. By April and May, retail prices picked up as demand increased and continued to rise into June. Now, they seem to be stabilizing at a level more than 24% of where it was at the beginning of the year, Black Book said.
Current used retail listing volume is about 13% below the start of the year and that inventory is starting to decrease, Black Book said.
Walsh said CMA is also spending more in buying cars at auction and buying more used cars at auction. They are paying more at auction for used cars, but that’s just par for the course, Walsh said.
“We’re not alone, every other dealers doing the same thing,” he said. “So when there are more people searching for salable used cars it drives up the market.”
CMA, much like other dealerships, are also calling up their customers to see if they’re interested in selling their used cars and getting a new one. Walsh said they’re searching for used cars that are about five years old with low mileage.
Overall, Walsh says the biggest challenge is meeting customers’ needs.
“We have fewer cars on the ground to satisfy what customers need. We have less selection, so you could come in wanting a certain trim level and we don’t have that to offer,”
he said.
He also said it’s becoming a challenge to repair cars. They’re having trouble getting certain parts to make repairs.
“So if you had to come and get repairs on your car, you might have to wait a week or two — not on all repairs, generally maintenance repairs and things like that where you’re in and out the same day — but in some cases it’s tougher to get the specific parts we need to make a proper repair in a car,” he said. “It’s causing customers to have to wait for some repairs to get done. We can navigate through this, but for customers it’s tougher for them to get the vehicle they want and get it prepared in a timely manner.”
Laura Peters is the trending topics reporter at The News Leader. Have a news tip on local trends or businesses? Or a good feature? You can reach reporter Laura Peters (she/her) at [email protected]. Follow her @peterslaura. Subscribe to The News Leader at newsleader.com.
