A sales rebound in March and solid first quarter of 2021 are reasons for industry optimism, but new-vehicle inventory shortages across the country due to the continuing microchip shortage are going from bad to worse, with no end in sight.
Jeremy Koch, general manager of Koch Ford-Lincoln in Edmonton, said his F-150 inventory is down 60-70 per cent from what’s normally on the lot.
“I have 100 retail trucks supposed to come in, but I don’t know if I’ll get any of them. I have close to 300 fleet order trucks, and again, I have no clue if they’ll arrive on my lot.”
And “dealer transfers are impossible,” at the moment.
“It’s Mad Max, right now,” he said, referencing the 1979 post-apocalyptic film. “Everyone has their own barrel of oil and they’re trying ward off all the other guys. It’s crazy.” Gerald Wood, head of the Motor Dealers’ Association of Alberta, which represents 380 retailers, said “most dealers say they’re selling pretty much everything they can get. Inventory is tight and we knew this was going to be the case for the next little while.”
‘REALLY SURPRISED BY RISE’
Canadians bought 384,335 new vehicles during the first quarter, up 15.6 per cent over the same period last year, according to the Automotive News Research & Data Center in Detroit. The increase is skewed because the first quarter of 2020 was hit by COVID-19, which essentially shut down the country in mid-March.
Wood said his members are saying the first quarter of 2021 “wasn’t that bad” and that they’re “really surprised” by the rebound.
“Year-over-year, in the first quarter in Alberta, we weren’t really feeling the incredible pain of the pandemic until about April 2020. So, looking ahead at the second quarter [of 2021], year-over-year, we’re going to look like heroes, and none of us wants to take solace in that,” Wood said.
DesRosiers Automotive Consultants estimates March sales totalled 175,186, up 86.2 per cent from the 94,061 units of 2020, but still down 3.6 per cent from the levels of 2019.
This year’s first-quarter numbers were still eight per cent below the same period in 2019, DesRosiers said.
The seasonally adjusted annual rate (SAAR) of sales came in at 1.91 million units, said DesRosiers.
KINKS IN SUPPLY CHAIN
DesRosiers called the number “a strong level above that seen in January and February, [and] that bodes well for the year as a whole.”
But Wood said dealers face an uphill battle moving forward. “We’ve still got tough sledding ahead of us. Consumers are ready to go, but inventory constraints will hold us back.”
The industry has been plagued by one supply-chain disruption after another, dating back to 2019, when about 50,000 United Auto Workers struck General Motors for more than a month in the United States.
COVID-19 arrived in North America in 2020, which contributed to a global shortage of semiconductor microchips that began late last year and has only worsened. Mix in a winter storm in Texas that affected the foam used in seating, and a cargo ship stuck in the Suez Canal for about a week.
“The microchip shortage is hitting us in the chops, at our domestic stores first and now it’s starting to bleed across to the imports,” said Michael Carmichael of dealership group UpAuto, with three stores in the Stratford area west of Toronto. “Our inventory hadn’t recovered from the GM strike of 2019. We were still playing catchup on that.”
Some automakers are trying to keep factories running even if it means delivering vehicles without certain features.
In late March, GM said that until end of the summer that Silverado and Sierra pickups equipped with the 5.3-litre V-8 engine would be shipped without Active Fuel Management/Dynamic Fuel Management, a cylinder deactivation system that saves gasoline. The semiconductor chip that powers the system is not available but should be available to be added to the 2022 models.
Ford had been building the F-150 in the United States and the Edge crossover in Oakville, Ont., letting them sit incomplete on factory lots as they wait for microchips. As the shortage worsened, it forced Ford in early April to announce a series of production cuts at its Dearborn, Mich., truck plant, including a two-week shutdown in April and the cancellation of overtime shifts into June. Its other F-150 plant in Kansas City, Mo., was also idled for a week in April and overtime shifts were being canceled.
“First COVID and then microchips,” Carmichael said. “I think we’ll be another 8 to 12 months before we can say there’s no more interruptions and be in a position to take a bit of a deep breath and know what to expect from an inventory perspective.”