Matthew in the Middle | The auto industry is broken – Eureka Times-Standard

Sign up for email newsletters

Sign up for email newsletters
If you’ve tried to purchase a new or used car lately, then you know what I’m talking about. It all started in March 2020 when the pandemic hit and factories shut down worldwide. This included auto assembly lines and more importantly, the micro-chip assembly lines that go into our new high-tech vehicles, giving us touchscreens, satellite navigation, heated seats and wireless charging to name a few. No micro-chips, no new cars.
The supply chain issues hit the auto industry hard. Toyota suspended the production of its popular Prius vehicles as they can’t get enough parts to make the cars and the assembly factories keep having COVID outbreaks. All automakers are having the same problems getting enough raw materials, such as resin and steel. Throw in a labor shortage and not enough truckers to deliver the cars and don’t even mention the increased fuel costs to transport the vehicles.
The other problem that hit during the onset of COVID was the national car rental companies saw their demand drop precipitously. They quickly dumped 33% of their rental vehicle inventories on the used car market and stopped purchasing new vehicles. Flash forward one year and people started getting vaccinated and travel became back in vogue with a vengeance. Grandparents wanted to see their grandkids again, not so much their adult children. People wanted to get back out on the road, only the car rental companies didn’t have enough inventory of vehicles to rent. Horror stories went viral of people having to pay $600 per day to rent a car as the supply and demand algorithms went bonkers. Since they couldn’t purchase enough new vehicles, the car rental companies started purchasing used cars and competing with your local auto dealership at the auctions for inventory. Supply and demand raised its ugly head again as the prices of used cars skyrocketed. I’ve heard stories of people selling their 3 year-old cars with 50,000 miles for more than they paid for it new.
As bad as it is with used car pricing, new cars are even worse. With gas prices hitting $7 a gallon, I’m in the market for a hybrid SUV. Honest dealers tell me up front, “We don’t have that vehicle in stock. Probably won’t have it for another three-to-six months, if we’re lucky. We used to get 20-30 of those vehicles every month. Now we get one or-two, maybe. Same 20-30 buyers for those one or two cars. Guess what happens to the price?”
Most new cars are now selling with a premium (mark-up) above MSRP (Manufactured Suggested Retail Price) or if you prefer auto dealer-speak, “market adjustment” pricing. If the MSRP is $40,000, expect to pay $43,000 to $45,000. Supply and demand. If you don’t want to pay the dealer premium, the next buyer will. Also, many auto dealerships will only sell to buyers who live in their county. So if you want a new Toyota Prius, only your county’s Toyota dealership can sell you one. At their price. Don’t cry for your local auto dealerships as they are experiencing record profits by selling every car, new and used, at maximum pricing.
Tesla CEO Elon Musk said recently the factories in Austin, Texas and Berlin, Germany “are gigantic money furnaces right now. There should be like a giant roaring sound, which is the sound of money on fire” as they are losing billions of dollars amid supply-chain disruptions and challenges in battery manufacturing for their electric vehicles.
Many auto manufacturers will be trending towards the Tesla model of consumers ordering vehicles online and delivering the finished product to the dealer showroom some months down the road. Think of ordering the car make and model, color, features and upgrades of your choice and the price is set when you order online. All you would have to do is give a non-refundable credit card deposit and the online software would arrange your auto financing for you. No more negotiating for the price, upgrades (true coat paint protection for only $595!) and having to waste hours at the dealership haggling over financing and other minor details.
With the average price of a new car at $45,844 according to J.D. Power, plus record gas prices, expect auto manufacturers to build more EVs (Electric Vehicles). Today EVs and plug-in hybrids are only 5% of the auto market. That number will go up dramatically in the future.
Matthew Owen resides in Eureka and believes the First Amendment allows for free speech.
Sign up for email newsletters
We invite you to use our commenting platform to engage in insightful conversations about issues in our community. We reserve the right at all times to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable to us, and to disclose any information necessary to satisfy the law, regulation, or government request. We might permanently block any user who abuses these conditions.
Copyright © 2022 MediaNews Group


Leave a Reply

Your email address will not be published. Required fields are marked *