Supply Chain Issues and Inventory Challenges For Franchised New Car Dealers
The automotive industry has experienced a variety of challenges since the beginning of the pandemic, and with ongoing supply chain issues impacting inventory, OEMs and dealers are encountering new obstacles at every level.
New Vehicle Inventory Challenges
The current supply chain issues are limiting the amount of new vehicle inventory produced and supplied to dealers. As every dealer knows, this leads to low availability of new vehicles, high prices on new and old vehicles, and a rise in older vehicles remaining on the road.
Issues in the supply chain are also leading to mass amounts of unfinished vehicles being produced and waiting on chips.
To combat this, some manufacturers have decided to produce and sell, at a discount, “unfinished” vehicles, with the idea that dealers can install the missing chip components as they become available. Other manufacturers have opted to drop popular features to increase sellable inventory, including rear-climate control, automatic start-stop features, wireless charging, hands-free driving, and HD radios.
For example, according to Automotive News, Ford will soon begin to ship and sell vehicles missing non-safety-related chips that can be installed at a later date. These missing chips control things like rear-seat heating and air conditioning and auto start-stop features.
With more used cars being sold and some new vehicles being sold “unfinished,” this will mean more, potential dealer-installed options. These missing parts will need to be installed as inventory is available, and older cars will need to be maintained to remain on the road.
The Rise in Used Vehicles
Inventory issues are also having an impact on the vehicles currently on the road. Due to the rise in vehicle price and inventory challenges, consumers opt to keep their current vehicles longer or purchase used.
This means more used cars are on the road than ever, with the average vehicle age nearing 13-years old.
Over time, wear and tear on vehicles lead to more part replacements. They also don’t run as efficiently as newer vehicles and require more maintenance, such as more frequent oil changes. It is estimated that vehicles that are a decade old cost twice as much to repair and maintain yearly than a vehicle that is just five years old. These aging cars represent a great amount of potential growth the fixed ops side of the dealership as more people will need parts and service as their vehicles age.
Roadblocks in Parts Inventory
Along with a disruption in new vehicle inventory, there is also a disruption in the supply of automotive parts (more specifically, materials). Dealers and repair shops are struggling to source some of the parts their customers need, resulting in vehicles taking weeks and sometimes months to repair.
The ability to communicate with customers is critical. Be honest with them and let them know if they can expect delay issues on specific parts. If a delay comes up unexpectedly, let the customer know what is happening.
If you are selling parts online, this communication may be easier. Dealers who are selling OEM parts online should be able to have the ability to display what parts they have in stock and which parts they do not. Controlling what inventory a customer can order online prevents customers from ordering an out-of-stock part, lowering order cancellation rates. Currently, many dealers are facing higher cancellation rates due to supply chain issues and inventory shortages.
The ability to shop online and expand sourcing options can help alleviate the pressure of getting parts by increasing the odds of finding a part. While your dealership may not have a part in stock, there is a chance that another dealership in the nation may. The ability to go online and shop around for the part can determine how long a car is sitting in a dealership’s service lane.
The same is true for other dealers and repair shops sourcing parts. By creating an online parts business for the dealership, dealers and repair shops nationwide have the ability to source parts from your dealership.
Looking Ahead With OEM Parts
While not much can currently be done about continuing supply chain issues, OEMs and retailers should focus on providing service to the aging vehicles on the road now, by maintaining OEM replacement parts.
Dealers lack new inventory, and consumers may be hesitant to pay the rising prices; the one thing that remains consistent is the vehicles on the road continue to age. This places more importance on fixed ops and the ability to sell and source parts. To do this efficiently, dealers need to expand their reach by taking their parts business online. By creating an online parts business for your dealership, you become part of a national market with access to millions of more buyers and thousands of more parts sources.
Ibrahim Mesbah is the Co-Founder and CEO of RevolutionParts, which transforms the way parts buyers and sellers connect.
A technologist, founder, and CEO, Ibrahim is passionate about marketplaces, payments, and eCommerce. Having spent the last decade leading the RevolutionParts platform, which has powered more than $3 billion in parts and accessories sales.View full profile