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Talk of the semiconductor chip shortage has been present in the news since the beginning of the pandemic, but now, some impacts are coming to Summit County.
When China locked itself down due to the coronavirus, manufacturers of semiconductor chips slowed operations, and it didn’t pick back up until the summer of 2020. This, coupled with the demand of remote employees who now needed technology to work from home, created more demand than there was supply.
The chips are used in many different electronic goods, such as video game devices, computers and even kitchen appliances like refrigerators. But one of the hardest hit industries is automobile manufacturers.
Just recently, Ford Motor Co. announced that it was going to cut production in many vehicles, including its popular F-150 pickup truck. The announcement is causing a ripple effect across the nation, including in Summit County.
“That has resulted in a very tight supply of inventory within an environment of high demand,” said Ryan Ramsay, president and general manager of Summit Ford Inc. “There’s a lot of pent-up demand for vehicles right now. Summit Ford normally stocks anywhere from 60 to 80 new vehicles on the property and we currently have 10. Ford predicts most of the dealers are going to run out of inventory here in the next few weeks.”
When will Ford have new inventory ready? Ramsay said it could be another few months.
“Ford has a lot of — I don’t know the exact number — tens of thousands of vehicles built that are being stored, waiting for these microchips to be installed in these vehicles so they can then ship them out to dealers,” Ramsay said. “And it’s anticipated that we’re not going to see that inventory until sometime in August.”
Summertime typically rakes in the most revenue in sales, Ramsay said, and he’s fully expecting the company to take a hit in its bottom line. To make matters worse, Ford officials don’t expect to make up for the shortage this year. All Ford dealerships will take a hit without the additional inventory.
“What it’s cost us already from the past two months through the time where we start getting replenished with inventory, it’s probably going to affect anywhere from 80 to 100 sales,” Ramsay said. He declined to quantify that volume into a dollar amount.
In addition to selling new inventory, Summit Ford Inc. also sells used inventory and has a service department. Ramsay said roughly half of the company’s sales comes from new inventory sales.
“It definitely is going to have a negative trajectory, but at the same time, dealerships are good in the way that we don’t depend completely on new vehicle sales,” Ramsay said. “ … It’s a portion of the business. … There’s really nothing the dealer can do about it. Nothing that the manufacturer can do about it. We’re kind of at the mercy of the supply chain.”
Because new vehicle inventory is down in many automobile manufacturers — not just Ford — prices are also increasing for used vehicle inventory.
“If you want your used vehicle business to be robust and strong, you have to have a strong new vehicle business,” Ramsay said. “When dealers, such as myself, if we have a lack of supply of new vehicle inventory, we have to turn to our used vehicle inventory and procure that inventory via several different avenues. And when many dealers or all dealers are doing that, that drives the supply down and it drives the cost up.”
Tim Weiers, co-owner of Red Mountain Autos, is seeing this firsthand. Red Mountain Autos only sells used inventory. Because of the current climate, Weiers said it’s harder to obtain used vehicles.
Weiers said when people buy new vehicles, they typically trade in the vehicle they already own. Less people are trading in their vehicles because of the low supply, meaning dealers like Weiers are having a harder time coming up with a used inventory supply.
“It’s a second or third turn is where our cars come from and with the impact of the shortage … everything is going up in price,” Weiers said.
Luckily, Weiers said there’s other revenue streams at Red Mountain Autos, such as its service department. It also helps sell consignment cars, too.
In the meantime, those looking to buy a new Ford vehicle should consider buying within the next few weeks. For those looking to buy a new vehicle, expect prices to sit a little higher than expected — at least until the shortage ends.
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May 23, 2021 at 03:00AM
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Automobile chip shortages impact Summit County | SummitDaily.com - Summit Daily News
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