'We've never seen anything like this': Computer chip shortage continues to impact car dealerships

Posted at 7:27 AM, Jun 11, 2021
and last updated 2021-06-11 12:56:35-04

MILWAUKEE — A shortage in computer chips continues to impact vehicle inventory at dealerships across the country, including here in southeast Wisconsin.

George Matthews, General Manager of Russ Darrow Honda says it is the reason why customers who buy a new Honda don't get two sets of keys.

"Honda is only giving the customer one key instead of two keys because they can use the chip that they put in the remote for the key, to build another vehicle," said Matthews.

"Normally we have about 6 to 700 vehicles in inventory right now we're about half of that," said Matthews of his lot on W. Metro Auto Mall in Milwaukee.

"We've never seen anything like this in the history of the automobile industry," he continued.

These days, cars need computers to run and tiny computer chips do the heavy lifting.

"They'll control how fuel is injected into the engine, how the display on the dashboard works, engine control, emissions control," said Jim Tolkan, with the Automobile Dealers Association of Mega Milwaukee.

Tolkan explains like so many supply and demand stories, this one starts with the pandemic.

"When there was no production, they weren't ordering more chips because they weren't producing any cars. But everyone else in the world was, for home appliances, laptops, desktops, iPhones, Androids, etc. So, ultimately, it caught up with the manufacturers," said Tolkan.

Buyers who can't get new cars are turning to used ones, and demand, and therefore prices are up for pre-owned vehicles also. Dealerships are making decent profits.

"Because unfortunately, if you only have, an example, 20 to sell, you have to make a sufficient profit so you can keep the doors open so to speak, not actually," Tolkan said.

Tolkan says if you trade in your used car, however, that can help offset the price of a new one.

"The average price of a used vehicle, today is worth $2-3500 dollars more than that same vehicle was worth twelve months ago," said Tolkan.

"The increase in cost on a new car is significantly less than the increase in value of the car you currently own," he added.

Matthews' dealership isn't hurting as badly as others for inventory.

"Honda had excess inventory they were sort of foreseeing this, that this could happen in the future. So, they had us build upon inventories about six months ago," he said.

Matthews said he hasn't had to raise prices yet on his brand new Hondas, but he knows many with far less inventory have.

According to J.D. Power, the average new car price was $37,200 in the first three months of 2021 -- that's up 8.4 % from the same period a year ago.

"Instead of flying, everybody is traveling by vehicle. So everybody is coming up to get the new vehicle," Matthews said.

"There's a lot of frustration. Customers show to at the dealership. They were showing the car online and unfortunately another customer was here right before them and bought the vehicle," he continued.

Being patient is one piece of advice Matthews has. Auto experts also say expand your search and check with dealerships farther out to see if they have the car you want.

"If a customer doesn't have to have the car right away, we can order the car and probably have the car in just a few months," said Matthews.

"Are people okay with that?" reporter Kristin Byrne asked Matthews.

"No. Because everybody wants the car now," he answered.

"Any idea as to how long this shortage will last?" Byrne asked Tolkan.

"An increased inflow of inventory will likely begin sometime mid to late June and continue for the next thirty to sixty days thereafter," he said.

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