Unless you've tried to order a new car in the last year, you're probably not aware of the stock shortages that the industry faces.
Of course we all know about Covid-19 and the impact it had on our economy, but it's probably not common knowledge to know how it impacted the Motor Trade and how this industry is treading water with a recovery still not within view.
We've all heard that classic sales spiel, where we're told that "the next person to view this car will buy it" or "it's a highly desirable car and won't stay around long" but do we ever believe those lines or think that it's just a tactical ploy to get us to sign on the dotted line?
As people drive by showrooms with cars in, they believe that of course there's plenty of cars as they can see some in their local showroom. But did you know that as part of the brand standards a Dealership must have at least one car of each model in showroom stock that cannot be sold, so customers are able to feel, see and order?
The same applies with demonstrators, Dealerships must have so many demonstrator cars for brand standards, as Dealerships struggle to order new showroom and demonstrator stock, they can't de-fleet their current cars, but cam't continue to be driven as the mileage is becoming too great.
So what is causing these delays?
Well back in March 2020 when most of the world entered lock down, car manufacturers seized production at their plants and brought their shut down periods forward. At the same time sales of laptops/mobile phones/PC's/gaming PC's were through the roof, demand had never been so high.
A car needs a semi-conductor chip for certain programming such as auto opening boot lid and folding door mirrors, a new chip is required when the specification of that car changes. Very little information is needed on the chips for cars, in comparison to the information required on the chips for an Xbox for example. This mean suppliers can charge much more for chis needed with more data.
As Sony and Microsoft placed large order for these chips, when car production resumed, certain cars couldn't enter production until the relevant chips arrived. This is when we noticed that a car without a tow bar could be scheduled into build 20 weeks ahead of a vehicle that had been on order for 10 weeks earlier that had a certain option selected. Trying to manage what options caused delays was difficult as those at the front of sale have no direct contact with the factories.
Several months later we began to see lead times improve, with semi-conductor chip suppliers managing to catch up with the backlog.
Other parts suppliers, dealers and brokers of new cars all suffered the lack of sales with a vast shortage of supply.
With new car stock in short supply, the cost of used cars rose at exponential levels. Many customers who bought a car on PCP, HP or for cash actually found themselves in a position where after 2 years of ownership they were able to get more for their car as a trade in that what they'd paid 2 years ago.
Whilst used car prices will stablise once new car supply improves, we'll not see them massively reduce in value, the way that they rose.
Production in many factories shifted to cars that could be built, where all parts were readily available, in most cases this was hybrid and electrically charged vehicles as these motors require far less parts than those made with combustible engines.
This was great news for the industry as Manufacturers, Dealers and Brokers could get together with finance companies to provide great UK lease deals once again, however this was short lived After negotiating, stacking, advertising deals to then take orders, only weeks later to wake up to mortifying and devastating news that Russia had invaded Ukraine.
There's two factories in Ukraine that between them produce 15% of the wiring harnesses for European Electrical Cars. Whilst both factories did initially suspend production, they are both back open and operating at a lower level of supply. This is having a huge impact on vehicle lead times once again, with some lead times for cars being quoted as over 12 months.
We're working with customers encountering drastic delays to help direct them into an alternative model or providing information to help them extend their current lease car.
We appreciate our customers understanding during these difficult unprecedented times and stand with Ukraine. When we first reported on the car industries reaction towards the invasion in early March, we certainly didn't expect it to last this long. Build dates on more cars are affected than we initially expected due to rising costs in fuel, disruption across Europe as aid is provided and inflation.
We've since been notified by Kia and VW that they will no longer stand on vehicle price protection as they can't guarantee the lead time of their products, so should price increases become effective then we will need to re-propose our customers that have not yet accepted delivery of their new vehicles. Whilst we''re disappointed with this approach, with inflation at record highs and lead times unpredictable we of course understand their position. We expect that more manufacturers could adapt this same approach too.