A recent article published online by CNN sheds some light on the turbulent times for today’s consumers shopping for both new and used cars. The culprit, in my opinion has been the manufacturers. Hear me out.
Pre-pandemic, with a strong economy, manufacturers were running plants at capacity, pumping out volumes of cars, making money (tight margins, however), and all was well with dealerships and consumers. When the pandemic forced people to stay at home there was a decrease in driving activity. With this, the demand for cars subsided. Meanwhile, vehicle production in Korea, China, and Japan, to name a few, declined because of pandemic-related labor shortages and plant closures, compounded by chip shortages, supply chain and logistical issues.
Now - guess what - a resurgence in demand.
Automobile manufacturers continue to be playing a bad game of catch up to bring their supply up to meeting demand. If you want to add some fuel to the fire, the push by manufacturers to get into the electric vehicle/hybrid space has added pressure to an industry already that lacks the discipline to manage itself. Stories about battery fires and electric SUVs and trucks that struggle to eek out miles using electric power are just some of the problems. All of this means that cars, automotive parts and chips are still not up to necessary inventory levels, and with consumer demand coming back (be it ev or gasoline powered) it’s the simple law of supply and demand. Too few cars, higher than expected demand, results in higher prices. Don't get me started on interest rates, and dealer fees - that's for another time.
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