‘Absolutely crazy’: Local car dealerships feel impact of global chip shortage

Justin Carie takes photos of a used truck in a P4 Automotive facility where used vehicles are detailed before being taken to different P4 Automotive dealerships in Columbus, Ind., Thursday, June 17, 2021. Mike Wolanin | The Republic

Last month, Tim Mellinger of ACRA Automotive Group in Columbus saw something that he rarely — if ever — has seen in 11 years of selling cars.

A customer came in with a Jeep Wrangler that she had purchased from ACRA, at 2820 N. National Road, about two years ago, looking to trade it in — and it was worth more money than what she had bought it for.

“They traded it back in last month, and it was worth more on trade than they paid for it from us two years ago,” said an incredulous Mellinger, who works in sales and finance at ACRA.

“It’s pretty crazy,” he added.

That scenario, though uncommon, reflects what local car dealers say is an “absolutely crazy” market for new and used cars that is being fueled by a worldwide shortage of computer chips.

Chips are used in a wide variety of automobile features and components, ranging from touch screens and cruise control to transmissions and partially automated driver safety features, The Associated Press reported.

The shortage, which can be traced to the eruption of the pandemic about 15 months ago, has caused car makers — including Ford, General Motors and others — to slash factory hours, temporarily shutter production facilities and delay shipments of new vehicles, according to wire reports.

As the virus initially spread last year, auto factories shut down for a couple of months, according to the AP. With millions more people working from home, demand for laptops and monitors led semiconductor makers to shift from cars to personal electronics. Soon, though, a faster-than-expected economic rebound boosted demand for vehicles, and auto plants tried to restore full-scale production. Yet chip makers couldn’t respond swiftly enough.

Complicating matters further was a fire at a plant owned chipmaker Renesas Electronics in Japan in March, which hobbled production, according to wire reports. The facility is expected to resume full production this month.

The end result has been depleted inventories of new cars at dealerships across the country, more and more consumers scrambling for used cars and soaring prices.

The surge in prices for pre-owned vehicles contributed mightily to last month’s jump in U.S. consumer prices, shooting up 7.3% and accounting for one-third of May’s overall price jump, according to the AP.

Though the auto industry is a cyclical business by nature with shifting demand trends, the current climate is unlike anything local dealerships have ever seen, according to several local car dealers.

“There are always surges and ups and downs (in the market),” said Leo Portaluppi, owner and president of Columbus Auto Group, which operates Chevrolet of Columbus, Chrysler Dodge Jeep Ram of Columbus, Ford of Columbus, Hyundai of Columbus and Nissan of Columbus.

“But this is definitely unique,” Portaluppi said. “…I’ve never seen supply being so low and demand being so high.”

Portaluppi said his inventory of new cars has been down as much as 70% in recent months compared to what it typically was before the pandemic.

But he said his staff have done some “unique things” to keep used car inventory at about the same level, if not a little higher, including going to people’s houses and contacting people who have listed their vehicles for sale.

“Before, we would have a two or three month’s supply sitting on the lot and now we don’t,” Portaluppi said. “That’s really the biggest change. It’s a supply-and-demand situation.”

Hubler Honda, at 10730 Hubler Drive in Taylorsville, has seen its inventory of new cars diminish over the past several months, said Jeff McIntyre, new car sales manager.

Last summer, when Hubler Automotive Group opened its 40,000-square-foot dealership in Taylorsville, there were about 400 cars on the lot and another 100 in transit, McIntyre said.

On Tuesday, there were 170 cars on the lot, with just 30 in transit.

Currently, the number of Honda CRVs on the lot is down by about a third compared to typical levels before the pandemic, McIntyre said. And the dealership, which normally has about 25 to 30 Honda Odyssey minivans on hand, had just five on Tuesday.

“When I had 400 on the ground, I had 100 in transit,” McIntyre said. “The number that scares me the most is 30 cars (in transit.) …I don’t foresee truly no vehicles to sell, but it’s going to be tough. It’s a little different environment than what most car dealers have been accustomed to.”

Derek Elkins, co-owner of Green Light Auto, which sells used cars at 2551 25th St. and 770 Jonesville Road, has seen his inventory roughly shrink in half in recent months.

And prices have skyrocketed in recent months, with higher-end cars up 20% to 30% and a “tremendous” increase for lower-end vehicles, Elkins said.

“What used to be a $2,000, $2,500 car — what a parent would start a 16-year-old kid out in — those cars as a running, driving, solid vehicle just don’t seem to exist anymore,” Elkins said. “That $2,000, $2,500 vehicle is now a $6,000, $7,000, $8,000-plus car.”

Overall, it has been a roller coaster year for the auto industry, and analysts say it’s hard to predict how long the chip shortage and tight supplies will last.

But most analysts and local dealers don’t anticipate a return to normal before next year, according to wire reports.

“I think this is something we’re probably going to experience as far as new car shortages probably until mid-summer next year,” McIntyre said. “I think there will be cars coming in … but people are used to seeing a wide selection of new cars sitting on the ground to look at. It’s going to be a bit before we’re back to that point.”