Automobile Shortage

[pmccumber]

I watched this vid last night:


That guy dissected the 3rd quarter numbers from all manufacturers about domestic automobile sales. Kinda fascinating. That guy tends to be a pretty good source for what Toyota/Lexus are doing.

It boiled down to GM is about 200,000 units off where they were a year ago and Toyota is currently slightly ahead of where they were a year ago and is going to lead in domestic auto sales for the first time ever.

I’m not really pulling for a company like it’s a home team or anything but the numbers are all given, and should be thought of, in the context of how companies are coping with supply chain issues. Toyota had been doing really well but the September quarter was just awful. They were off ~30% pretty much across the board in September. The thing that really struck me was that the companies are now planning for this now to actually WORSEN in the next few months and not begin to abate until mid 2022.

I have a 2020 Corolla SE and was in getting parts for the fleet at Boulder Toyota two weeks ago and a salesman was in there shooting the shit with Paul and the guy told me that they “can’t get Corollas” and that I could probably get more than I paid for mine two years ago if I traded it in on something they did have. He offered to get me an offer. I’ll be damned if 10 minutes later I had an offer for $20,100 for a car with 38k miles that I paid $19,200 for in October 2019. I’m not selling it but my goodness.

What a mess.

 

[AimCOTaco]

Interesting insight indeed. Does not come as much of a surprise, from what little I know it seems that Toyotas global supply chain is heads above their competitors. I think it boils down to a system that is data driven, vertically integrated and designed to be responsive from the ground up.

 

[SteveH]

Last week, Liberty Toyota (Colo Springs - North) had 2 cars (no trucks) in the showroom, and 7 trucks out front (new/used?) - the parking lot looks like a ghost town. Clearly a shortage. They did not rush out to offer me cash for my '98 4Runner with 261K. Hmmm....

 

[pmccumber]

There was a shortage at one end of the supply chain for a while because of a lack of production in 2020. So most manufacturers actually did ok for a period of 2021. Now another element in the supply chain is rearing its head and this one looks pretty pernicious. I think car capital is going to continue to appreciate for a bit.

 

[AlpineAccess]

My BIL put a PO in on a new suburban in July. They were told 18 weeks. After what probably qualifies as almost stalking their sales rep at the local dealership (guy would literally refused to communicate for almost a month) he called to begrudgingly inform them he now has no ETA on their vehicle and that he needs them to pick a different paint code as they will be getting a 2022 vehicle with a different color pallet. Like a $60k purchase...

 

[SherlockOoms]

Working on buying a 2021 Rav4 Hybrid right now in the XSE trim (two tone white/black). Cant even test drive one because they are sold before they touch down at the dealerships. Have one reserved at Stevinson Toyota East that might arrive this month. Same car at Groove Toyota they are asking for $2k over MSRP because "people really like the colorway". It is definitely going to get much more crazy before it starts to even out again.

 

[DaveInDenver]

It boiled down to GM is about 200,000 units off where they were a year ago and Toyota is currently slightly ahead of where they were a year ago

It's interesting that number of 200k as it jives very closely with the number in a Fortune article I just read with respect to GM, where they cite 278k.

You may or may not have known that Toyota suffered a major semiconductor supply chain issue in 2011 due to Fukushima which prompted them to adapt their normally widely recognized model of efficient JIT to better address electronics as a highly vulnerable long-lead item.

Fukushima earthquake hits automotive and semiconductor supply chains

An earthquake has struck the the north-east coast of Japan, near Fukushima Prefecture, almost ten years since the area was devastated by a much stronger earthquake and tsunami that took more than 19,000 lives and led to global supply chain disruption.

www.automotivelogistics.media

Toyota kept more chips on hand than anyone else and while there's plenty of supply chain issues generally they have not been impacted in the same way as others. I've read of anecdotes of vehicles just parked in where ever they can stuff them in the distribution channel waiting for controllers to be fitted eventually.

How Toyota kept making cars when the chips were down | Fortune

A global semiconductor shortage has hobbled the auto industry in 2021—but Toyota was able to tame it. Competitors are watching and learning.

fortune.com

It goes to show why Toyota is such a manufacturing model. You aim to be as lean as possible but not so lean that you increase risk of supply issues causing production disruption. If it makes sense to keep stock on risky items then you do that.

A lot of schedulers see JIT to mean you never want to keep stock and to the bean counters trying to avoid covering payments they absolutly love never having inventory span accounting periods or taking up shelf space. But that's not the only point of JIT. Toyota didn't hit a full stop but ramped production down. When supply chains start to recover (probably still at least year or more out) they can soft start back into production.

Also the question of supplier qualification should be raised, to which Toyota actually has had indirect control of it's own chip fab via Denso for some time now.

DENSO Licenses SJ MOS Transistor | News | DENSO Global Website

You can see "DENSO Licenses SJ MOS Transistor". DENSO continues to develop technologies that support a better life for all.

www.denso.com

DENSO Embarks on RM160 Million Advanced semiconductor Production in Malaysia | News | News | DENSO Malaysia Website

You can see "DENSO Embarks on RM160 Million Advanced semiconductor Production in Malaysia ". DENSO continues to develop technologies that support a better life for all.

www.denso.com

 

[pmccumber]

So a coworker yesterday casually mentioned he is selling his 93 yo father's 2016 Camry SE with 68k miles for $13k. I said "I'll take it" before he finished the sentence. I don't need another car but I can figure out which of the fleet goes for a car that is at least $4k under market. Probably my wife's 2013 Prius ...

 

[ScaldedDog]

I'm certain I could sell my PSD Excursion for well over what I paid for it.

Nearly 19 years ago...

Mark

 

[subzali]

Your excursion is beautiful Mark

 

[BritKLR]

Early this year I ordered a Subaru Crosstrek, 6spd manual as a mountain car for the wife. Back then there was on 3 in the US, 2 in Florida and 1in California. We waited 8 weeks for it to be built and delivered and now have about 300 miles on it. The dealer has already e-mailed us offering to purchase it back at msrp so they can have one to sell due to demand......already paid the State and Boulder Co. their friggin taxes otherwise it could have been a nice $4K profit!

 

[bassguyry]

I took my 2017 200 over to Stevinson West for service a few weeks ago. Dropped it off at 8AM, and got a call at 9AM from a sales rep offering $5k over what I paid for it in 2019, and it also has 20k more miles than it did when I bought it.

Granted, that offer might also have to do with Toyota discontinuing the LC in North America, but still...

 

[Notyourmomslx450]

I'm certain I could sell my PSD Excursion for well over what I paid for it.

Nearly 19 years ago...

Mark

I miss my 7.3 Excursion.

 

[AimCOTaco]

I took my 2017 200 over to Stevinson West for service a few weeks ago. Dropped it off at 8AM, and got a call at 9AM from a sales rep offering $5k over what I paid for it in 2019, and it also has 20k more miles than it did when I bought it.

Granted, that offer might also have to do with Toyota discontinuing the LC in North America, but still...

So they wanna sell Land Cruisers to Americans again already? Can't they make up their minds .

 

[Jenny Cruiser]

My neighbor down the road got a call from his Toyota dealer in May asking to buy his wife's 2018 or 2019 Highlander, so he went down and ended up trading it straight across for a new 2021 4runner. Last spring I was shopping for a Tundra TRD Crewmax. The best deal I could find was a 2020 in that bright blue for $43k out the door. I passed it along to a friend at work. He sold it in July this year for just under 50K.

 

[lars]

Two weeks ago, I came home with a new 21 4runner. Got an amazing deal with a trade in on a 15 runner with 70,000 miles on it. Could not pass it up.

 

[AlpineAccess]

I'm trying to figure out why it makes more sense for these dealers to get you into a new vehicle in exchange for the older models?

I get that they are marking up the older vehicles too, but giving a huge trade in and reasonable price on a new vehicle seems to counterweight the margin on the used vehicle a bit?

Why not just mark up the new vehicles more? The lots look empty!

 

[DaveInDenver]

I'm trying to figure out why it makes more sense for these dealers to get you into a new vehicle in exchange for the older models?

I get that they are marking up the older vehicles too, but giving a huge trade in and reasonable price on a new vehicle seems to counterweight the margin on the used vehicle a bit?

Why not just mark up the new vehicles more? The lots look empty!

I was wondering the same. Thinking a couple of things, so just spitballing.

All dealers (car, home, financial, etc) work on margin, so they're making money as long as there's buying and selling generating transaction fees.

There's also hold backs, so perhaps Toyota gives them a final payment when a new car sells. Maybe that's large enough to make good a deal that looks like a loss on its face.

And always the interest generating motivation should there be new loans or leases involved.

I'm jaded though. As the old saying goes, "If you can't figure who's the sucker at the table it's probably you."

 

[gungriffin]

I'm trying to figure out why it makes more sense for these dealers to get you into a new vehicle in exchange for the older models?

I get that they are marking up the older vehicles too, but giving a huge trade in and reasonable price on a new vehicle seems to counterweight the margin on the used vehicle a bit?

Why not just mark up the new vehicles more? The lots look empty!

I wonder if there is a requirement of financing at prime rates that it not be over MSRP. At the end of the day, probably 95% of buyers are buying a monthly payment and not the total purchase price.

 

[bassguyry]

I was wondering the same. Thinking a couple of things, so just spitballing.

All dealers (car, home, financial, etc) work on margin, so they're making money as long as there's buying and selling generating transaction fees.

There's also hold backs, so perhaps Toyota gives them a final payment when a new car sells. Maybe that's large enough to make good a deal that looks like a loss on its face.

And always the interest generating motivation should there be new loans or leases involved.

I'm jaded though. As the old saying goes, "If you can't figure who's the sucker at the table it's probably you."

I'll add to the spitballing...

There might also be an interest expense component that drives dealerships to sell more new vehicles vs. used. IIRC, most large dealerships finance the purchase of new vehicles via a revolving line of credit with the manufacturer, while used vehicle purchases might be funded with the dealership's liquidity. I'm not sure of the terms on these lines on new vehicles, but I'd assume there is some requirement to make periodic interest payments - if this is the case, then the dealership would definitely have an incentive to push new vehicle sales to avoid these interest payments, which could potentially be greater than the cost of purchasing a used vehicle in trade.

Total speculation here, though.