The worst crisis for automakers in 50 years has left dealerships with little to sell as prices rise to consumers
The root problem is the same across the country – a global shortage of computer chips has forced automakers to cut production, causing a shortage of new and used vehicles. But Detroit says the predicament looks particularly humiliating here.
“This is a car manufacturing city. There should be no shortage of cars,” said Benyam Tesfasion, a taxi driver who was busy taking passengers from the airport to rent cars from locations 10 or 20 miles away. Another advantage of his daily trips, he says, is driving. Through gigantic parking lots as automakers stock newly manufactured cars that are still waiting for a few final chips.
The Detroit experience shows how a shortage of semiconductors nearly two years ago upended manufacturing — and forced change in one of America’s most beloved consumer markets.
“This may be the biggest disruption we’ve seen since the 1970s and the fuel crisis,” said Matt Anderson, a transportation historian at the Henry Ford Museum complex in Dearborn, referring to the turbulent period that forced auto companies to produce more fuel-efficient vehicles.
The chip shortage, he added, “is something that I am sure my successors will consider in the coming years.”
Used car market in disarray with soaring prices
Gone are the days when buyers could visit a dealership and drive home a cherry red convertible full of their favorite features. Buying a car now means placing an order and waiting, sometimes for months, for the car to arrive.
Gone are the days when buyers could count on finding affordable wheels. The average price of a new car in the United States has increased 20 percent over the past two years, to $45,975, according to data provider Cox Automotive. The average used vehicle increased even more — by 40 percent, to $28,012.
Those rises were a major factor fueling inflation, which reached a 40-year high last month. The new car is increasingly becoming a “luxury product for the rich,” said Charlie Chesbrough, chief economist at Cox Automotive. “For a family that’s $60,000 or $70,000 a year, you can’t pay for a new car.”
The global auto industry produced 8.2 million fewer cars last year than it would have produced without the chip shortage, according to consultancy AlixPartners. The outlook for 2022 remains bleak, with automakers expected to sell just 14.4 million new cars in the United States, down from nearly 17 million in 2019.
A year ago, Paul Zimmerman, a Chevrolet dealer, offered about 700 new cars for sale on his land outside of Detroit. Today he has about 25.
Before, “If you’re a customer, you can go and look at a black jacket or a silver blazer. White. One without a sunroof. One with a sunroof.” Now there’s hardly any,” said Zimmerman, who bought at the dealership in February 2020. So there really isn’t any ability to shop in person.“
It changed everything in the dealership’s operations, called George Matic Chevrolet, which opened in 1967 and ranks among the largest Chevy showrooms by area in the United States.
Instead of coming to browse the available vehicles, customers now place orders and wait, sometimes for months, for their cars to arrive. Instead of working on the showroom floor, salespeople now spend hours tracking their customers’ cars online, researching to see when they are out of production and available for pickup.
On a recent Monday morning the dealer had 183 cars in his GM system that were nearly complete but still missing some final components. Zimmerman said that General Motors coined a new term for these — “build shy” — because they build shy of parts.
This changed the car buying process, Zimmermann said, which is often an emotional decision.
“There is still a lot of desire to have that tactile experience, you know, to touch, feel, smell, test drive,” he said. Customers ask, “Do you have one that I can come over and sit in? Do you have one that I can take for a car ride? Do you have one that I can just look at?”
“In the absence of that, I think that stops some people from actually making the decision,” he said.
The Detroit Pistons haven’t played at Auburn Hills mansion, a suburban plaza, since 2017, and the building itself was demolished in 2020. But the parking lot on Thursday was occupied by nearly 2,000 newly built GM trucks, which Chevy dealers said. It has chips. Security guards declined to comment.
Asked about the lottery, GM spokesman David Parnas noted the company’s recent announcement that chip shortages and other disruptions had left it with 95,000 incomplete vehicles, which it aims to complete and sell to dealers by the end of the year. Parnas said GM is holding the vehicles “in safe locations” near its plants. He added that the company is racing over the long term to reduce the number of unique semiconductors it needs to ensure a more reliable supply.
Similar fleets of unfinished cars are hidden throughout the Detroit area and beyond. One auto industry executive said he recently saw thousands of trucks parked around a General Motors plant in Silao, Mexico. A former factory employee told him the vehicles had lost chips.
In recent days, nearly 50 F-150 trucks affixed to new vehicle stickers have been sitting behind a low-rise office park near Ford’s headquarters in Dearborn. Security guards told the Washington Post that Ford owned the cars and that the 1,200-car site was full a few days ago.
A Ford spokesperson, Saeed Deeb, did not respond to questions about these trucks, but said that “the entire industry has been managing global commodity issues and chip challenges for more than two years.”
“We are continuing to work to get our vehicles to our customers as quickly as possible. He said… he remains inquisitive.
The problem is actually hitting most automakers. Tesla was the only major company to increase its U.S. sales year-over-year in the first half of 2022, as Honda, Nissan and Volkswagen all suffered more than 30 percent declines largely due to supply problems, according to Cox Automotive.
The shortage is forcing Detroit-area buyers to compromise — even those who spend their days building cars for a living.
Ahyana Elliott, a factory worker at Chrysler’s facility on Detroit’s east side, is in the market for a new car. She’s been a car enthusiast since childhood, already owning cruisers and Camaro but wanted a “winter car” that could handle Michigan snow, she said while browsing vehicles at Bob Maxey Ford, a dealership downtown near the Detroit River.
“My dad said, ‘You have no reason why you can’t work. If one car doesn’t work, you have another,'” said Elliott, who spends her spare time meeting fellow car enthusiasts at her local Corvette club.
She was looking forward to a new Ford Bronco but had heard the wait could be a year or more. So now she’s chasing used cars instead, but the high prices and high interest rates are causing her the sticker shock. There aren’t a lot of options on a lot of distributors, either.
“It’s terrible. There is nothing available,” she said.
Two giant chipmakers warn of delays in expansion as support bill dwindles
At a Chevy dealership in suburban Auburn Hills, Lauren Fisher was preparing to buy the lease for her Equinox SUV rather than trying to register a new one.
“With the car I rent now, I got everything I wanted: leather seats, a sunroof, heated seats and a steering wheel,” she said. “If I were to rent it again, I guarantee you I wouldn’t find it. I would build it or it would take too long to get it.“
Industry executives say labor shortages and scarce supplies of materials other than chips are hampering production at automakers and suppliers, but chips are the more difficult problem.
When an automaker loses one piece of the puzzle, it can suddenly shut down production and force dozens of suppliers to abandon their plants, leaving everyone frustrated, said Thomas Kowal, president of Seraph, a global consulting firm with offices in Troy, Michigan. They were busy advising automakers and suppliers on how to overcome the shortage.
The automaker might suddenly tell suppliers, “Hey, we don’t need to run production on Friday,” Kowal said. Then on Saturday you might ask suppliers to pull their workers out to produce parts over the weekend. “It’s like a yo-yo constantly,” Kowal said.
Uber driver Lyubko Stefanovsky, who was a porter at the Chrysler plant, said he saw the disruption when he drove Ford workers to and from their shifts at a plant in Wayne. Sometimes when he picks them up they say they are sent home early. They told him “there is no chip, no work”.
Some auto executives are flexing his ear around the chips. “A couple of months ago, I was driving one guy – he worked at Ford, he worked at Kia and Hyundai,” recalls Stefanovsky, who immigrated to the United States from North Macedonia. He said: Why don’t we build? [chip] Factories here, so will not face this problem? “
Stefanovsky rents his car through an Uber program, because he can’t buy one.
“You can’t even think about buying the car anymore – even a used car is up 40 percent,” he said. “In those two or three years, it’s all like backwards. It just isn’t the same anymore.”