Microchip shortage shorting supply of new models, say Big Three dealers in Manitoba

Manitoba dealers representing American manufacturers are reporting a distinct dearth of new models this spring — a situation they attribute to a microchip shortage — an unexpected consequence of the widespread shutdowns mandated by a variety of governments last spring with the appearance of the COVID-19 virus.

While East Asian manufacturers planned ahead — one Winnipeg Hyundai store general manager reported that Hyundai ordered a three month supply in advance and his lot is full and a local Toyota dealer said that his supplies are where they should be — leaders of General Motors, Ford and Chrysler stores are feeling the pinch.

Steve Chipman is president of the Birchwood Automotive Group, which operates 23 facilities, representing 21 auto manufacturers. Most of the stores are in Manitoba.

The problem is, Chipman pointed out, that last spring when auto manufacturers had to close their plants for several weeks, they cancelled their microchip orders. The microchip companies turned around and sold the microchips to the home electronics makers. As a result of COVID, demand for home electronics products went through the roof. Microchip makers have limited capacity and the home electronics market is more profitable.

“We normally have a 90-day supply of the most popular models,” he noted “but right now we are running with just a 45-day supply. And we are having trouble getting some of the more popular models. Some of the higher trim levels just aren’t available. There is one Ford store I have driven past recently that hardly has any vehicles on its lot.”

Larry Vickar, president of the Vickar Auto Group – with five dealerships in Winnipeg – added that some of the Vickar stores are “in dire straits” as far as new product inventory is concerned. “Our Nissan store isn’t doing too badly,” Vickar says, “but our Ford and GM lots look sparse.”

In Northern Manitoba, longtime dealer Murray Haukasas (the H5 Group of Companies) painted a bleak picture right now for his five stores in Dauphin, the Pas, Flin Flon and Thompson.

“In my 34 years in business, I have never seen anything like this,” he commented, “and it doesn’t look like it is going to break any time soon.”

He noted that General Motors inventories still haven’t recovered from the strike that ended in the fall of 2019. And then with COVID-19 hitting the next spring, it made the situation worse.

“Our four Chrysler stores were doing marginally better,” he notes, “but even there, supplies are tightening. Our traffic is up almost 50 per cent. People want to buy, but we don’t have a lot to sell. If the customer has something specific in mind, then good luck with that.”

He added that if a fleet customer in northern Manitoba wanted to order some new vehicles today, it is quite likely that they wouldn’t be available until the next calendar year. “Our sales reps are suffering financially because they rely on commission and we don’t have a lot of product to sell,” he said. “Even the used car market is being squeezed and parts are in short supply. About all we can do is try to keep on good terms with our factory reps and try to have them keep us in mind when new product is available.”

In Brandon, Manitoba’s second largest city with about a population of about 50,000, Doug Murray, general manager and dealer principal with Murray Chevrolet Cadillac GMC and Murray Chrysler Dodge Jeep Ram dealer principal, reported that it is not only cars that are in short supply. Pick-up trucks, which dominate auto sales in rural Manitoba, are also hard to come by in both the new and used categories.

“Our inventory is turning over very quickly,” he reported. “Our limited stock creates a sense of urgency for buyers. And we are writing more pre-orders.”

The benefit of that for the customer, he pointed out, is that they are able to designate exactly what they want in the vehicle.

Bruce Giesbrecht, the president of GM dealer Giesbrecht and Sons in the resort community of Gimli on the southwest shore of Lake Winnipeg, added that even writing pre-orders is tough because you never know when the model will be delivered. He pointed out that used car prices are going up because of demand and that his service department and body shop are both extremely busy.

Larry Vickar is optimistic that supply will improve by the fall, whereas Steve Chipman foresees the current situation dragging on through the rest of the year. Haukaas observed that the industry has always been cyclical but this situation may take another calendar year before it improves.

“We will be OK,” Giesbrecht said. “We will get through this.”