NewsCovering Colorado


Slim pickings at local car dealerships as pandemic, fire-related semiconductor shortage takes toll

Microchip shortage leads to far fewer options
Lone new pickup at John Elway Chevrolet on South Broadway
Posted at 9:37 PM, May 13, 2021
and last updated 2021-05-13 23:37:07-04

DENVER — Gone are the days, temporarily, where new car shoppers have a lot full of cars and trucks with options in all different colors and size ranges to choose from.

New car shopping used to be a healthy give and take about how much the dealer could knock off the sticker price.

These days, thanks to a worldwide computer chip shortage, the sales team might not have a new car to sell.

"Every car built today has multiple chips," said Tim Jackson, president and CEO of the Colorado Automobile Dealers Association. "They run steering systems, brake systems, electronic systems on the dash. They run your keys and your remote start system."

Jackson said it wasn't just pandemic-related factory shutdowns that led to the current semiconductor shortage.

"There was also a fire in a chip factory in Asia," he said. "That particular [Renesas] factory [in northeast Japan] produced about 30% of the world's automotive chips."

He said the chip shortage is affecting all automobile manufacturers, some more than others.

"Toyota has a four-month supply, and Hyundai, which is part of KIA, a South Korean company, produces its own chips, so they don't have to wait for someone else's," he said.

The manufacturing supply chain issue is affecting new car supplies at local dealers.

"We're used to seeing 450 new Chevrolets on the ground, and right now, we probably have 30," said Jeff Silverberg, a partner and general manager at John Elway Chevrolet on South Broadway, the number one volume Chevy dealer in Colorado.

"It's so shocking. Even though it's becoming normal for us, it doesn't feel that normal," he said.

Salesman Thomas Jordan says the difference in the amount of cars on the lot is noticeable. He pointed out the lone new truck in the lot, a dark blue Chevy Silverado with the Z71 off-road package.

Silverberg calls the vehicle shortage a real game-changer.

"We'll work through it," he said. "It's just a different way of doing business."

"Chevy builds what most people want, which is trucks and SUVs," he said. "It's hard to explain to someone who's used to coming in and seeing a lot filled with vehicles of every color, model and option to have a scarce selection."

Wes Bowman, who is in the market for a new pickup, calls the shortage of vehicles "depressing."

"We do a lot of construction," he said, "so we need something newer and reliable."

He said he's open to buying a late model, used truck, "if it performs well and is certified," but he prefers something new and said it's a bit unsettling to see so few new cars and trucks.

Jackson said the demand for good used vehicles is so high that prices are up dramatically too.

"At Manheim Auctions, one of the largest auction houses supplying used cars for dealers, the average paid for [a lot full] of used cars is up 50% in the last six months," Jackson said.

"It's a bad thing if you're buying a car right now, and it's a good thing if you're selling a car or have one that you can sell because the price on that car is going to be a lot higher today than it was even six months ago," he said.

"It works both ways," Silverberg said. "Trades have never, and I have done this for over 30 years, been worth more than they are now."

Silverberg calls the chip supply chain issue a "wake-up" call for America.

He wants production to return to the U.S.

"It's a hard lesson to be learned," he said. "Hopefully, it is learned. If we can start producing more of these items domestically, it would certainly prevent this."

In the meantime, Silverberg said they're selling vehicles before they're delivered and even before they're built.

"We're writing down names and shaking hands," he said.

Buyers are encouraged to be patient.

"In a normal year, there are 15 to 18 million new cars sold in the country, and each car will have multiple chips. Depending on the type of car, it could be anywhere from 5 to 15 computer chips inside each car," Jackson said.

With fewer chips being made, there is less ability to buy the car in the color you want with the equipment you want, he said.

"A lot of these vehicles require multiple chips to do some of the new bells, whistles and features we're all impressed with. The choice becomes, if we have five chips, do we build five base model trucks and SUVs or do we build one that has all the features that people are looking for?" Silverberg said. "That's what the manufacturers have to do right now, and it seems they're leaning toward quantity to provide more vehicles on the ground, though they may be a bit lower equipped."

Jackson said it will be two years before we're caught up with this shortage.

Silverberg said he and his staff are working hard to get customers what they want.

"We're problem solvers by nature," he said. "Every day is just another challenge that we find a way to overcome, and we will."