There was a strong finish to the financial year for new car sales according to the latest VFACTS report from the FCAI. In May and June, more than 200,000 new cars were delivered, and the industry is heading towards the magic million in 2021.
These results, however, are contradictory to the industry narrative of supply constraints and delayed deliveries. So, what should fleet and novated lease buyers keep in mind when planning to purchase a new car?
Plan aheadThis is the advice we received from dealerships when we made a few enquiries during July. If you have your heart set on a specific make, model and colour, you need to get in the queue by placing an order.
All manufacturers ask their dealerships for monthly factory orders. Before the pandemic, dealers would order a mix of vehicles for fleet and retail sales based on their expected demand and guaranteed sellers. In 2021, this process still exists to some extent, however most manufacturers now also require a signed customer order form to complete the process.
Consider some bells and whistlesAnother way to get a new car faster is to look at the higher range models. With limited production spots, manufacturers are juggling the delivery of the models that will make them the most money. If it’s within your budget, the extra luxury might be a nice reward after a tough period for your business and the extra safety features will keep you and your staff safe on the road.
Be open and flexibleIf all else fails, shop around and be flexible on the colour and specification level. New cars are still arriving in dealerships and circumstances change. A dealership may have secured some extra stock in an unusual colour or an order might get cancelled, so if you’re open to options, you may be able to snap something up.
What’s stopping the inflow of new cars?
Poor vehicle supply is being blamed on the shortage of semi-conductor chips – an important component in modern vehicles, which are filled with computing and safety technology. These chips are also used in devices like personal computers, smartphones, video games, consoles, as well as in appliances like washing machines and toasters, so they’re in very high demand.
Earlier this year, many automotive manufacturing plants in the US closed temporarily or significantly reduced production, all due to the lack of semi-conductors. Even though they’re some of the smallest components you’ll find in a vehicle, they’re an essential piece of the puzzle.
In June, Volkswagen Group Australia (VGA) Managing Director Michael Bartsch said that difficulties in obtaining the desired production of certain models were a “fact of life for European importers”.
“While the semi-conductor shortage poses no significantly greater issue than those our brands deal with on a weekly basis, it’s important that customers are made aware of them,” Mr Bartsch said.
He remains positive though. “While certain of our popular variants are temporarily in short supply, VGA is in a position to offer customers an array of choices. The situation is subject to rapid change. We are in daily contact with head offices to seek means of improving the supply of affected variants.”
So, who ate all the chips?There are a number of reasons for these supply issues, which started when the pandemic hit in 2020. At the time, car manufacturers significantly reduced production forecasts while the demand for personal technology soared as lockdowns were imposed around the world and working from home became the new normal.
Chip manufacturers pivoted to the higher value products, which included chips to run 5G devices being launched globally during 2020. Then, supply chains were disrupted by a fire in a Japanese semi-conductor plant, and the big chill that swept across the US in 2021 temporarily closed two factories.
Because of this shift of focus by chip manufacturers from automotive to other industries, vehicle supply isn’t expected to recover until 2023. There are plans to build new factories in a bid to increase production, but this will take several years as these facilities are complex to set up.
For businesses in Australia that require vehicles to generate revenue, planning replacements and managing fleet utilisation should be a focus for the rest for 2021. That way, you might just avoid unexpected delays and the higher maintenance costs that come with older vehicles as you move through 2022.
At least for the next year or two, if you can anticipate your vehicle needs and get in early, you’ll save yourself the stress of being short of vehicles when Australia starts opening up again and business picks back up.