Some automakers are stepping up communication with their dealers to allay widespread perception that Canadian retailers are not getting their fair share of vehicles during the ongoing microchip shortage, even if there’s no direct evidence.
“We have gotten feedback from quite a few dealers at some brands that there has been an intensified communication with them on allocation issues — but not all brands and not across the board,” Tim Reuss, CEO of the Canadian Automobile Dealers Association (CADA), said in June.
Kia Canada, for example, is providing its dealers allocation figures that compare Canada with other global markets, said spokeswoman Susan Bernardo.
“Although recent inventory has not been optimal due to the semiconductor shortage affecting global supply, we still maintain one of the highest months of supply globally for Kia subsidiaries,” Bernardo said. “We are making efforts to further educate our dealer body on global allocation to provide comparative insights into other markets.”
A study commissioned by CADA found that 57 per cent of Canadian dealers surveyed “don’t believe that [they] are getting their fair share of global vehicle allocation.” The survey, released in May, polled 535 dealerships across the country.
It also found that 91 per cent of dealers were concerned about inventory levels in general during the microchip shortage.
More than 4.7 million vehicles have been taken out of production schedules worldwide due to the microprocessor shortage, according to AutoForecast Solutions. That has strained inventory levels around the world as fewer new vehicles make their way to dealership lots, all while demand picks up in North America as COVID-19 cases subside and vaccination levels rise.
A SHORTAGE OF EVIDENCE
Canadian dealers have voiced concerns that other countries are being favoured over Canada, although Reuss said CADA has found no evidence of this.
Automotive News Canada reached out to every major automaker in the country except Tesla, which does not have a dealer network, to ask about their response to the survey’s findings as well as dealers’ concerns about unfair allocation. Four automakers — Kia, MercedesBenz, Nissan and Stellantis — responded.
In an emailed statement from Nissan Canada spokesman Didier Marsaud, the company is “getting its fair share of the global allocation” and that it is “working tirelessly to secure the maximum quantities for North America and in turn for Canada.”
“We meet very regularly with our dealers and share the information in a transparent manner to keep them up to date,” Marsaud wrote, adding that Nissan “completely understands the level of frustration of dealers.”
“The economy is hot, the pure retail industry is healthy, and we want to be in a position to fulfill that demand. ... Other than maximizing our production for Canada in the short term, our top priority right now is to ensure we put plans in place to make up some of the missed opportunities in the second half of the year.”
Kia Canada said it “works closely with its dealer body to ensure an optimized and fair monthly supply of inventory.”
Mercedes-Benz Canada said it provides its dealers “timely updates on upcoming inventory levels” and works to ensure the delivery of an appropriate supply of new vehicles to meet demand in Canada.
Meanwhile, a spokesperson for Stellantis said the company “continues to work closely with our suppliers and dealers to mitigate the manufacturing impacts caused by the various supply chain issues facing our industry.”
SHORTAGE MAKES SENSE
Steve Chipman, CEO of Birchwood Automotive Group in Manitoba, said that while he believes Canadian dealers are getting shortchanged, it is logical that some automakers would prioritize the United States and Europe over Canada. New-vehicle margins are generally higher in the United States than in Canada, and vehicles built in Europe are cheaper to sell there than in North America because they do not need to be shipped across the Atlantic Ocean, Chipman said.
“They can sell more cars in the [United States] than they can in Canada,” he said. “They have the same problem [there]. They have high demand and short supply.
“And with European costs, they’ll often stay in Europe because there’s less freight costs, they can turn the cars faster, etc. I know that from dealing with some of the European manufacturers.”
Chipman said he hopes that inventory levels will slowly return to normal over the coming months. He said his group — which includes stores that sell Kia, Nissan and Stellantis brands — was at about twothirds of its normal new-vehicle inventory in late June.
“It’s going to be tough for the next few months, [but] starting in September and October [it] could start getting better,” he said, though he did not expect a return to “real normal” until spring 2022.
The supply crunch could also be alleviated as global vehicle production starts to normalize in the second half of 2021 and into next year, said CADA’s Reuss.
“The situation is improving somewhat, obviously not to pre-COVID levels,” he said. “But there seems to be an improvement that’s starting to happen now on the production side. It’s going to take some time, though, until dealers see some relief on this.”