Chips, COVID & the 2021 New Car Supply Shortage

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2021 New Car Supply Shortage

Why your next new car could be months away & what you can do about it

Semiconductor Computer Chip Shortage Causes 2021 New Car Supply Shortage in Australia

CAN I buy a new car and get it this month? Probably not.

Will I have to pay full price to buy a new car in 2021? Not necessarily.

Here’s why there are so few new cars in dealerships in 2021 & how you can still get a great deal.

First, let’s go back a little more than a year to understand how we got here…

COVID & Chips: A Short History of the 2021 New Car Supply Shortage

December 2019

The infectious COVID-19 disease hits

First quarter 2020

As lock-downs happen globally, new car production in various plants is brought to a temporary standstill

April 2020

Australian new car sales drop 48.5 percent compared with the same month in 2019.

It’s the largest monthly decrease since figures were recorded.

This comes as the industry continues to struggle, following 25 consecutive months of sales decline.

Opportunist new car buyers start circling for a bargain.

There are good deals to be had.

But the expected fire-sale prices don’t really eventuate.

Predicting there’s worse to come, dealer groups don’t stock up on cars like they normally would.

June 2020

Driven by periods of an improving COVID-19 situation in parts of Australia, as well as government stimulus, consumer confidence has grown.

The EOFY prompts strong demand for new cars.

The effects of low new car stock levels starts to bite.

It’s no longer possible to just walk into a showroom and drive away in a new car.

Customers are in the unusual situation of waiting months for common car models.

Second half 2020

New car demand remains strong. Supply is still short.

With lock-downs and work-from-home still happening globally, home office and consumer entertainment electronics are in hot demand and their manufacturers have been snaffling the supply of semiconductor components – computer chips – that might have gone into building your next new car.

In turn some vehicle production plants are at a standstill.

Early to mid-2021

Demand for new and used cars is immense.

Australians are shunning public transport.

Taking off on road-trip-style holidays.

And spending up on a nice new car with the budget usually reserved for doing things that we can’t do right now – such as travelling overseas.

The new car stock situation goes from bad to worse.

Delivery time frames for common models rapidly slip from ‘next month’ to four or five months.

2022

Industry experts predict the new car supply and demand situation will be resolved.

What Car Buyers Can Do About the 2021 New Car Supply Shortage

Well, there’s no way around the fact that, for a lot of models, there will be a wait of some months.

But it seems Australian new car buyers are generally a pretty patient bunch.

According to one Sydney Mazda Fleet Sales Manager, “Most customers are happy just to get a place in the queue and know their car is coming.”

But what about the conventional wisdom that suggests the best deal is on a vehicle in the showroom that a dealer ‘wants to get rid of’.

With so few cars sitting in showrooms, and so many potential buyers, is there any way to get a decent discount?

“I’m still discounting cars for the brokers that I’ve been dealing with for a long time, because they’re my customers,” our Mazda Fleet man said.

“The current situation will pass and I want them to still be my customers at the end of it.”

So, if run-out deals typically apply to vehicles in stock, surely it follows that a customer will pay top dollar to factory-order a new vehicle.

Usually, yes, however in the 2021 New Car Supply Shortage environment, there are cases where this is inverted.

According to a corporate sales manager at one of the Big Three premium European brands, “I can aggressively discount a factory order vehicle, but for a car that’s landed in Australia that can be delivered next week, it becomes more difficult.

“As soon as a car comes into stock, retail knows they can sell it for full price.”

Yes, in hindsight, the job of a car broker pre-COVID was simple.

Tender the requirements of a client to a network of dealers, dealer groups and fleet suppliers.

Achieve a cracking price on a vehicle that exactly matches the customer’s wish list, arrange the order, and see the client happily drive away inside a couple of weeks.

COVID & the chip shortage have certainly made the process more difficult, but also allowed a broker to flex a few new skills.

5 Key Benefits of Using a Car Broker during the 2021 New Car Supply Shortage

  1. Find a better delivery time frame for a vehicle (where possible)
  2. Find the exact vehicle specification and colour that a customer is looking for
  3. Leverage a substantial discount on a car where the supplier may be aware there are very few alternatives available
  4. Optimising delivery time frame vs best price. Is the offer better on a vehicle in stock, or a factory order? This can vary from case to case.
  5. Give individuals and small business the ability to purchase via fleet supply channels – the dealer group division that usually supplies to companies and the government.

Okay, so that last one is of benefit during normal times. But right now it’s even more valuable.

Because retail salespeople are more standoffish than usual – they have way more customers than cars to sell. And they’re even more difficult than normal to negotiate with.

There are also some genuine upsides of the current situation.

Your old vehicle will be worth more in the current market, as some new-car buyers divert to second-hand cars to avoid the wait, putting used cars in short supply, too.

And with interest rates at historic lows, there are some ultra-low rates available for car loans via a good car finance broker such as ours.

So if you need some help sourcing your new car, get in touch today.

I’ll get you a top deal on your new car and secure the earliest available spot in the queue.

James Whitbourn
Founder & Car Broker
CarHelper.com.au