Americans might be ready to get back to normal. When the Centers for Disease Control loosened mask restrictions for vaccinated individuals, the masks seemed to come flying off. And retail establishments, restaurants and car dealerships also might have seen a boost in sales and foot traffic.
In fact, Americans swamped car dealerships during the beginning of 2021. Car sales are booming, and, for dealerships, this might have been the happiest of New Year gifts after the craziness of car shopping during Covid!
Car and Driver reported that across the board, sales were up eight percent compared to the first quarter of 2020. But that’s not all. Car and Driver also noted that several manufacturers—including Kia, Toyota, Nissan and among others—reported double digit surges in sales.
These sales figures only accounted for new car sales, though. Thanks to the microchip shortage, used car sales also are getting a nice boost. Per the National Automobile Dealers Association (NADA), this boost to the used car sales is anticipated to continue through summer.
THE DOWNSIDE TO THE UPSIDE
While buyers are heading to car dealerships to purchase a new car, there might be a downside to the increased sale figures. During Covid, many automobile manufacturers canceled orders for microchips, perhaps believing that they would not need as many microchips with decreased pandemic production and sales.
Other industries—like technology—took on the supply of microchips that the automotive industry didn’t want. What happened next was a bit of a perfect storm thanks to Covid. Chip factories also shut down during Covid, which affected production and the supply. The automotive industry needed more chips that it didn’t have, the makers of the automotive chips can’t produce more chips fast enough and now there is a shortage of microchips that has caused decreased production across the industry.
Add to all this the fact that more personal computers were in demand (at home learning and work), which, per USA Today, the manufacturers didn’t expect…and, yes, the chip issue is pure chaos. There also are numerous other issues that add to the problem too. Suffice it to say, there is a shortage…and now there are a lot of chip crunches ahead.
Those increased new car sales may flip to decreased sales if the shortage continues. Why? Because consumers can’t buy what doesn’t exist. Multiple manufacturers had to cease production and some vehicle models were left without chips.
According to an article by NADA:
“Inventory at the end of the first quarter of 2021 was 12.8% lower than at the beginning of the year with fewer choices on dealer lots. At the end of the first quarter of 2021, industrywide supply fell to 39 days from 48 days at the beginning of the quarter. If sales remain strong in April without a significant boost of inventory, a decline in sales by late in the second quarter is expected due to low inventory levels.”
BE WILLING TO COMPROMISE
Making a list of different vehicle choices can help consumers who are on the hunt for a new car. However, at least one dealership noted that consumers might need to be flexible with just the little details…like car colors.
This might not be the time to really get particular about choosing a bright blue car over a champagne hue of the same model. Given the crunch of some production numbers and depending on the availability at a local dealership, the new car shopping motto might be: “You get what you get and you won’t throw a fit!”
If that car has all the desired features and it’s the ideal model, then color might not—or maybe should NOT—be a deal breaker. When the chips are down, when production is down, choices might be down, too. Consumers might just be thrilled to find exactly what they want at the price they want.
Sales figures for car sales saw a boost in the first quarter, however, will sales continue to soar throughout the summer? Consumers might be holding onto their cars, so used car prices might be higher…with lower supply. And the supply of new cars could be crunched by the microchip shortage.
This doesn’t mean, though, that consumers won’t be able to find cars. Instead, those in need of a new vehicle (or used) might need to make a few concessions. They may have to sacrifice color or other details or they may have to opt for a different model. Only time will tell, though, how the sales numbers in later quarters will add up now that the chips have fallen.