Supply and demand

Local dealerships impacted by shortage of new vehicles; Lack of computer chips to blame for drop in production

-Messenger photo by Chad Thompson
A collection of vehicles sits in the Shimkat Motor Co. parking lot on Wednesday. Car dealerships have had a difficult time getting in new vehicles due to the computer chip shortage.

Computer chips might not be the first part that people think of when automobiles come to mind. But when it comes to modern vehicles, computer chips are an essential detail in the building process.

There are as many as 80 different computers in more sophisticated models. Those computers control everything from touch screens to transmissions to partially automated driver safety features.

A disruption in the supply of those chips has led to a shortage of new vehicles being delivered to the lots of local dealerships.

According to TJ Pingel, Shimkat Motor Co. general manager, there are three manufacturers in the world that produce the chips for vehicles.

He said a combination of natural disasters and the COVID-19 pandemic caused the closure of two of the three major factories throughout the past year.

-Messenger photo by Chad Thompson
A 2018 Toyota Corolla, front, is displayed in the Fort Dodge Ford Toyota parking lot on Wednesday. Used cars have been higher priced on average in recent months due to a shortage of new vehicles being manufactured.

“Things everywhere changed with COVID,” Pingel said. “At the start of that they stopped production of vehicles for a little bit and that slowed inventory.”

But when production started back up a couple of months later, computer chip makers had switched to manufacturing semiconductors for consumer electronics like laptops and gaming systems, according to published news reports.

That created a shortage of automotive chips.

Then in March, Renesas Electronics Corp., one of the companies that produces the chips, had a fire at its Hitachinaka, Japan, factory.

Earlier this month, the company announced that it has nearly recovered from the blaze.

-Messenger photo by Chad Thompson
A 2021 Jeep Gladiator is displayed at the Shimkat Motor Co. Newer vehicles have been harder to come by due to a chip shortage.

Additionally, NXP Semiconductor plants in Texas were shut down earlier this year due to severe winter storms.

Taiwan Semiconductor Manufacturing Company, or TSMC, is another manufacturer, but it has prioritized some of its chips for the making of smartphones.

“These semiconductors are just gone right now,” Pingel said. “New vehicles are very difficult to get right now. I think that’s what people are seeing missing from some car dealerships.”

With all of the complications, Pingel said it could be a while before production levels are totally back to normal.

“It sounds like starting next quarter all three (major manufacturers) will be up and running,” Pingel said. “We should start receiving full shipments by quarter 4. I think next year, probably 2022, we will start looking a lot more normal when people drive by the car dealerships. We will probably be full capacity next year.”

The inventory of new vehicles at Fort Dodge Ford Lincoln Toyota is lower than usual, according to Matt Johnson, the dealership’s general manager. But he said the new vehicles the dealership gets have been selling briskly.

”We have been very fortunate,” Johnson said. ”Business is great.”

He said new vehicles have been selling soon after they arrive at the dealership at 2723 Fifth Ave. S. He said the used vehicle market is strong, and added that the vehicles people are trading in are, in most cases, ”worth more than they ever have been.”

Although newer vehicles have been harder to come by, Pingel said Shimkat has been relatively fortunate with its inventory.

“We have been pretty lucky,” Pingel said. “We still have over 20 new vehicles with more coming in.”

New vehicles at Shimkat, 3126 Fifth Ave. S., include Jeep Cherokees, Jeep Gladiators and Dodge Ram 1500s.

“The loaded up Ram 1500s were hit hard,” Pingel said. “I know a lot of dealerships I’ve talked to that don’t have those on the lot. We have been lucky that we haven’t ran out yet.”

Pingel said the Chrysler Pacifica minivan, which includes a high number of safety features, has been hurt by the semiconductor shortage.

Meanwhile, Pingel said Shimkat has more used vehicles on the lot than have been there in a few years.

“We have over 50 used cars on the lot,” Pingel said. “People are still buying, but new vehicles are short right now.”

In the past year throughout the U.S., used vehicle prices on average have climbed 30 percent, according to Black Book, which tracks car and truck data.

The chip shortage has been unprecedented in many respects.

“I’ve been doing this a dozen years, we have never seen anything like this,” Pingel said. “In talking with the Shimkats, they have been doing this 75 years, they said they haven’t seen anything like this.”

The disruption in the supply chain is a different kind of problem compared to the Great Recession experienced over a decade ago.

“We have so much demand and we can’t keep up with it,” Pingel said. “The worst problem to have is to not have the vehicles to get everyone one. The recession you just didn’t order as many to make sure you were OK. This is the opposite. Nothing has slowed down in terms of people shopping like they always have. It is bizarre. We have never seen anything like this.”

Johnson said Ford and Toyota have told dealers that May and June should be the low point for the inventory of new vehicles. He said the number of new vehicles available for sale is expected to gradually grow through the summer and fall before returning to normal levels late this year and early next year.

”Locally, we’ve been very fortunate because the economy is so strong,” he said. ”We feel lucky to be here and to be able to serve our customers.”


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