Global computer chip shortage leads to low inventory at area automobile dealerships

There’s lots of empty spaces at Finnegan Chevrolet’s new car lot in Rosenberg thanks to a global computer chip shortage. The dealership has about 25% of the new vehicles it usually has in inventory.

A global computer chip shortage has led to a massive delay in new automobile production — which means less inventory in new and used vehicles but great deals on trade-ins.

News stories about the surge in vehicle sales use terms like “insane,” “bizarre,” “sky-high,” “soaring” and “unchartered territory.”

Vince Finnegan, part owner of Finnegan Chevrolet-Buick-GMC in Rosenberg, said his car lots have only about 25% of the new vehicles they had last year at this time.

“Our GM store is down about 75%-80%,” he said. “We have about 25% of new GM vehicles for sale right now that we had last year at this time. We’re still waiting on the other 75%-80% we ordered to come in. They’re ordered. We’re just waiting for them to arrive.”

Jeff Smith, general manager of Helfman Ford in Stafford, said his lot is also looking sparse.

“One year ago, I probably had 600 to 650 new cars and trucks in our lot on average — that includes cars and trucks that were being sold and being replaced by new ones coming in,” he said. “When I showed up to work this morning, we had 75.”

In an effort to get automobiles to dealerships, some manufacturers are cutting upgrades long expected by the consumer.

“Most vehicles nowadays have dozens and dozens and dozens of computer chips that control back-up cameras, dashboard displays, driving sensors and just about every electronic system in a vehicle,” he said. “Some manufacturers — not all — are eliminating systems that are not absolutely necessary on the new models they have coming out.”

Many of the new vehicles being sold by Finnegan has been pre-purchased by buyers, he said.

“We’re really selling new vehicles before we get them in and as fast as we can get them in,” said Dave David, general manager at Finnegan Chevrolet.

On Thursday, Finnegan Chevrolet in Rosenberg received 15 new trucks. Most of them had been pre-purchased. One fortunate customer who arrived at the dealership shortly after the vehicles were unloaded was able to purchase one of the trucks that had not been pre-purchased.

Jeff Smith at Helfman Ford said he’s never seen anything like it in the four decades he has been in the automobile sales industry.

“I’ve been doing this for 40 years and I’ve never experienced anything like this before,” he said.

“Now, when a (car transporter) pulls into our driveway with eight to 10 new vehicles, we stand up and start clapping. It’s just incredible.”

Car & Driver said the shortage of new and used vehicles is due in part to consumers shopping around with the stimulus money they received by the federal government in response to the coronavirus pandemic.

The global chip shortage has meant a boom in used car sales, Smith and Finnegan said.

According to the U.S. Bureau of Labor Statistics, used-car prices jumped nearly 30 percent between May 2020 and May 2021, although part of that increase comes from depressed used car prices during the first couple months of pandemic shutdowns.

Finnegan said he is having a hard time keeping used cars on his lots due to demand overwhelming supply.

“We’re selling them almost as soon as we get them,” he said, adding his used car lots have 20% less inventory this month as they had in June 2020.

Smith said the shortage of automobiles, both new and used, has been great for car buyers thinking about trading in their old vehicle for a new or used one.

He said buyers are getting “extremely high” amounts for their trade-ins.

“New cars are at a premium right now. Even used cars are at a premium,” Smith said. “Buyers are definitely getting more for their trade-ins now than they would have gotten six months ago.”

Andrew Couch, who lives in Texana Plantation neighborhood of Richmond is one.

He and his wife wanted to downsize now that their kids are in college, so they decided to trade in their Yukon XL.

“We were pretty pleased with the offer we got from Finnegan,” he said. “Finnegan really gave us a great price and because we made so much off our trade-in we were able to buy two vehicles instead of just one.”

Finnegan said shoppers have educated themselves about the shortage of vehicles and come in expecting top dollar for their trade-ins.

He said he expects the global chip market to “iron itself out” and the automobile industry to return to normal in the near future.

Smith agrees.

“It’s just like the lumber industry right now. It was high and now it’s leveling off,” he said. “The automobile industry will eventually level off and get back to normal. In fact, it may have peaked already.”

What does Smith tell his sales team?

“I keep telling them the car business is resourceful, that everything is going to be OK, that the vehicle inventory will finally get back to normal,” he said. “I expect things to start returning to normal around the third week of July. We should start seeing more new vehicles arriving late next month or early August.”

Both Smith and Finnegan said low inventory hasn’t hurt sales.

“Sales have remained pretty steady,” Smith said.

Said Finnegan: “Even though our stock is somewhat depleted at the moment, we’re still selling vehicles. We’re still getting new vehicles in, just not as fast as we’d like. And it’s still a simple process to buy a vehicle at Finnegan’s. It’s really a great time to buy a new vehicle.”

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