How big is the new car deficit left behind by the pandemic? Sales were impacted by approximately 8.2 million lost over the pandemic. The extent of the new car supply deficit varied depending on the region, the severity of lockdown measures, and the level of reliance on international supply chains. The best estimates are 3 million plus as you can see in the graph below. Source

 

 

The factors that contributed to the supply deficit included:

  • Factory Closures: Many automobile manufacturers had to temporarily shut down their production facilities to comply with lockdown measures and ensure the safety of their workers. These closures disrupted the normal production flow that has yet to come back. Furthering the issue, many vehicle manufacturers have partitioned their production outputs to focus on electric vehicles too.

 

  • Supply Chain Disruptions: The automotive supply chain is complex and involves numerous suppliers providing various components. Disruptions at any point in the supply chain can lead to production delays. Our just-in-time inventory management philosophies were intended to save us money in storage costs and waste. Many have gone to a hybrid model since.

 

  • Microchip Shortages: A significant issue was the shortage of semiconductor chips. These are crucial for the functioning of various electronic components in modern vehicles. The pandemic disrupted chip production and increased demand for electronics during lockdowns. This has led to new partnerships between vehicle manufacturers and chip and battery manufacturers to ensure their place in the supply chain. No doubt these lessons were learned during their chip supply issues. Source

 

 

  • Consumer Demand: While demand for new cars dropped initially due to economic uncertainty and lockdown measures, it rebounded in some regions as restrictions eased. This surge in demand combined with reduced production created a supply-demand imbalance. That in turn caused an affordable issue in the new and used car market. That issue has grown the price of a new car by over 10,000 dollars with little relief in sight.

 

  • Shipping Challenges: The pandemic also impacted global shipping and logistics, causing delays in transporting vehicles and parts. This remains an issue today. If you have to get repair work done to your vehicle you know this to be true. Finding a good service center is always a challenge but having to wait twice as long or more for the work to be done due to parts backlogs is even more frustrating. Fortunately, some dealers and parts distribution centers have upgraded their technology and supply processes to help ease the burden. Nevertheless, the issue remains.

 

Many are wondering if new cars will ever come back to what we remember as normal in supply and price. That is tough to answer but we know for sure there is a major deficit that we have to build out of that could take years. Now with the looming UAW strike ahead, we could be in for another era of empty new car space on dealer lots and a used car bonanza. Only time will tell. Let’s hope that doesn’t happen.