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After stalling, auto dealers speed up


In an era of unprecedented demand for new vehicles, a global shortage of chips is forcing auto dealers to scramble to serve customers and find new ways of doing business.

According to Autoweek, the chip shortage is rooted in the early part of the pandemic when automakers largely shut down and chip suppliers turned to computers and games. When the auto industry picked up steam, chipmakers simply couldn’t abandon electronic contracts.

Pete McNamara, president of the NH Automobile Dealers Association, which represents more than 500 motor vehicle-related companies in the state, said the shortage is expected to last another 12 to 18 months.

“The big headache is supply chain disruptions; it started with COVID and continued with labor shortages among suppliers around the world, ”he says.

McNamara says that at least one major manufacturer was considering placing vehicles at dealerships so that they are in place when the chips are ready, which can be shipped to dealerships and installed by local technicians.

Amanda Grappone Osmer, fourth generation owner of Grappone Automotive Group in Bow, says they have more cars than a month ago and a lot to offer as they sell Toyota, Honda, Mazda, Ford and Hyundai. But she says they still only carry around 15-20% of normal inventory.

“From a business perspective, it’s not so bad for us not to have cars that people don’t buy,” says Osmer. “Under the normal model, we would have several million dollars in inventory on the land on which we have to pay interest. It’s harder for consumers because they have less choice. Much of what comes out of a truck would usually be fresh inventory. … (N) now things are sold as they arrive.

Vanessa Delegas, president of Lovering Auto Group, with Volvo dealers in Nashua, Concord and Meredith, says they too have experienced a low supply of new and used inventory. “I’m on the board of directors for the New Hampshire Auto Dealers Association, and everyone is in a similar situation today with inventory. We’ve all gotten used to selling with fewer days of supply.

She says it varies by manufacturer, although Volvo has performed quite well for a while. “Our shortages were mainly due to increased demand that the automaker hadn’t anticipated for this year, but no one knew what to expect. Volvo was one of the few brands to have recorded an increase in sales from 2019 to 2020. ”

At Crest Auto World in North Conway, where they sell Chevrolet, Chrysler, Dodge, Jeep and Ram vehicles, Christopher Weiss, president, says the shortages have been a big challenge. “Chevrolet heavy trucks and Jeep Wranglers are the most popular models. Anyone looking to buy it has seen how difficult it is to find what you are looking for.

Service pending? Maybe not

With fewer new cars available, people are spending their disposable income on repairing older models. The demand for service is on the rise, and with the backlogs for parts, customers are looking for these courtesy loan cars to keep them on the road.

“We have increased our fleet of service order loans as we have seen a high demand for appointments,” says Delegas of Lovering. “We are also in the middle of a model year change, so some dealers are choosing not to increase loans because there is too much demand from sales, so some are asking customers to wait several weeks for an appointment. -you.”

She adds that after diagnosing a problem, technicians, who may have been able to get this part overnight, now sometimes have to wait several days.

A perfect storm

At Merchants Automotive Group in Hooksett, which includes Merchants Fleet and Merchants Auto, the effect of supply chain disruption is a little different, says Adam Secore, senior vice president of operations. He says that because Merchants Fleet supplies vehicles to businesses across the country, it puts Merchants Auto in a unique position. “While many local dealers are struggling to find inventory or even close, Merchants Auto has a constant flow from the fleet segment, which puts us in a much better position than most dealers, even at scale. national, ”he said.

Secore says the fleet has had insight into supply chain issues. “On the corporate fleet side, we buy directly from the factory, so we knew a year ago that they were starting to have manufacturing issues,” says Secore.

He adds that prior to the shortages, Merchants Auto still received its share of the fleet when leases expired, and these vehicles, mostly from fleet customers in the Northeast, would be brought to Hooksett. “Given the supply chain issues, now all of Fleet inventory across the country is coming back to Hooksett,” he says.

Meanwhile, another strategic move has paid off. In an era when everyone stayed at home and had everything delivered, Merchants Auto started a trading division, selling used vans for last mile delivery.

“It was the perfect storm,” Secore says. “On the corporate fleet side, we’ve had experiences with commercial accounts and we’ve had vehicles coming from rentals across the country. We saw the need and developed the commercial sales division. Demand is off the charts, and I don’t think it will slow down with so many people unable to get their brand new vehicles.

He says Merchants Auto is gaining national reach, especially the commercial division. “People fly in from Texas, Florida and Philadelphia,” says Secore. “The merchants have the cars, and that’s the game right now.”

Pot of gold in your garage

“For consumers, this can be the perfect time to sell,” says Delegas. “If you have a second car that you don’t need, this is the only time I’ve ever seen where you can make money with your car.”

Osmer agrees. She says the used car market is directly linked to the new car market; therefore, it’s just more difficult to get anything right now. “If you get flyers in the mail or hear a dealership on the radio say, ‘Sell us your used car’, that’s no joke; everyone is looking for used inventory.

She says that even if someone thinks they are unfair, check it out. “Find out how much your car is worth compared to what you owe it, and you might be pleasantly surprised. Just keep in mind that you want to have a vehicle to replace it, ”says Osmer.

Auto pricing platforms, such as Kelley Blue Book, Galves, and Edmunds, can lag behind, Osmer says, which means the price dealers are willing to pay for used cars may be higher. .

“We have software that is useful for showing exactly how many vehicles are available within a defined radius, how many kilometers there are on the vehicle and the trim level. We can see if the market is flooded or in short supply. It’s a whole science that explains how to evaluate a trade, ”says Osmer.

The light at the end of the tunnel

Weiss says he hopes the supply chain problems will ease by 2022. “Maybe we’ll start to see inventory increase after the first of the year, but it looks like that position is changing. each day. Some say it may only be a month or two, but from experience I am not confident. Once the chip shortage is resolved, what other challenges might arise because they haven’t been able to produce at full capacity? “

Delegas says she doesn’t have a clear idea of ​​when things will get better either. “The semiconductor chip shortage changes almost daily from what I hear from Volvo. They were pretty quiet when it came to talking about when things could get better because it changes so often, ”she says.

Delegas adds that supply chain disruptions are hitting most industries, including the retail sector. “I think consumers are getting used to it now,” she says. “We just try to be very direct with customers.”

Osmer at Grappone says manufacturers are talking about a light at the end of the tunnel, and there is talk of bringing chip production back to the United States. “But I don’t know how long it takes to set up an entire facility; it doesn’t seem like a short-term solution, ”she said. “I hope we have learned from COVID. We have been able to sell online for eight years, but many resellers have not been able to. I just hope everyone will take these great lessons and learn from them.

Weiss says he, too, believes there is room for reflection, despite the unexpected nature of the pandemic. “Who would have thought that would ever happen as the country moved to a just-in-time manufacturing process? But that doesn’t leave a lot of leeway when that supply chain is disrupted, ”he says. “There are some things that you know you will sell and maybe you will build buffer inventory. I get both sides, but definitely on the critical stuff they need to reconsider these inventory levels. “

McNamara says the floor plan (the term for unsold financed vehicles available) is a two-way street, so even if dealers are adjusting to lower levels during the shortage, he expects them to come back to the acres of cars that people are used to seeing.

“The dealers love this model… and the build-on-demand concept is very difficult in the auto industry because it’s such a long supply chain and people want options.”

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