Waiting times for most new cars now stretch between three and 12 months.
In some cases, the waiting lists are even longer.
Although it is difficult to accurately compare, industry analysts believe Australians are experiencing the longest delays for new cars since World War II.
Adding to the frustrations of new-car buyers: prices are rising at a rapid rate.
And paying a premium doesn’t mean you can jump the queue.
The global coronavirus pandemic initially slammed the brakes on new-car sales, but then economies began to open up faster than expected – prompting a spike in demand.
According to the latest estimates, the long waiting times for new cars could continue for the remainder of this year.
Despite gloomy forecasts, car companies are working overtime to try to deliver outstanding orders as quickly as possible – but most buyers are advised to brace for a lengthy wait.
Here are the top five reasons new cars are delayed – and why prices are rising fast.
Semiconductors
Most new cars are equipped with between 300 and 3000 semiconductors, or computer chips.
Modern motor vehicles are data hungry in part due to all the extra safety equipment now expected as standard.
In the early phases of COVID-19, car companies hit the panic button and dramatically reduced forward orders for parts required for vehicle assembly.
When global economies bounced back quicker than expected, car companies resumed their orders – but semiconductor suppliers had moved on to more profitable industries that require more expensive and more advanced computer chips.
Modern cars use comparatively basic semiconductors – versus those used in computers and smartphones – but they must last the life of the vehicle and withstand extreme heat, humidity, and cold.
While a glitch on a computer or smartphone can often be fixed with a quick reboot, semiconductors used in cars must be more resilient, if not completely failsafe.
Semiconductors take 26 weeks – half a year – to manufacture from start to finish, in an environment that is cleaner than a hospital operating theatre.
Car companies can’t just build their own semiconductor factories (although a few are weighing up this option) because such facilities take up to 18 months and $7 billion to build.
For now, semiconductors continue to flow through at a trickle – and some car companies have deleted features to keep assembly lines moving.
Factory worker absenteeism
Many of the approximately 30,000 parts that make up modern motor vehicles are manufactured in developing countries that have been severely impacted by COVID-19.
Factory worker absenteeism due to the coronavirus has added to the inconsistent supply of car parts – combined with interruptions to production of semiconductors.
Shipping delays
Shipping has emerged as the latest “choke point” for getting new cars to Australia.
The number of car-carrying freighters coming to Australia has halved since the start of the global pandemic because shipping companies have been trying to avoid lengthy COVID quarantine waiting times.
Some ships need to be modified to meet our changing taste in cars.
The available space on car-carrying ships bound for Australia now comes at a higher cost, not only due to a lack of frequency but also due to the types of vehicles we are buying.
The buyer shift towards larger vehicles such as utes, four-wheel-drives, and vans has placed unexpected and unprecedented pressure on car-carrying ships headed for Australia.
The rapid rise in online sales during the pandemic – and subsequent spike in parcel deliveries – has seen demand for high-roof vans more than double in Australia.
But not all car carrying ships are configured to accomodate such vehicles in sufficient numbers.
While some car-carrying ships have adjustable decks – to accomodate taller vehicles – high-roof vans and other large vehicles leave unused space above them, which makes them less efficient and more costly to transport.
Most car-carrying ship decks are primarily split into vehicles of three heights: below 2 metres, below 2.5 metres, and above 2.5 metres.
Industry insiders say car companies are prioritising passenger cars, SUVs and utes that fall under the 2 metre limit because those vehicles are in the highest demand and deliver among the highest profit margins.
There used to be at least four car-carrying ships docking in Australia each week – two would travel clockwise and two would travel anti-clockwise around the country dropping off cars at major ports.
As Drive has previously reported, currently there are only about two car-carrying ships a week on average coming to Australia because some shipping companies don’t want to take the risk of being quarantined off the coast if a crew member has COVID – or don’t want to reconfigure their ships to operate more efficiently.
Price rises: reason one
The rising costs of car parts – and shipping – have helped push up the prices of new motor vehicles en route to Australia.
Previously, when there was an over-supply of new motor vehicles – as was the case for the previous two decades – car companies would absorb these costs by paying for them out of their profit margins.
But times have changed…
Price rises: reason two
The forces of supply and demand are the largest contributors to the rising cost of new cars in Australia.
Demand is off the charts and car companies can’t build new motor vehicles fast enough.
For the past two decades, there was an over-supply of new vehicles, and car companies slashed prices to win deals. Customers got addicted to sharp drive-away prices that were, in real terms, at 30-year lows.
Today, car companies and car dealers are holding all the cards – and, increasingly, buyers are finding themselves in the uncomfortable position of “take it, or leave it”.
Demand for new motor vehicles has been high amid international travel restrictions – with people treating themselves to a new car rather than an overseas holiday – and customers seemingly have money to burn.
The car industry is extremely skilled at measuring the forces of supply and demand – and changing customer behaviours – and adjusting prices quickly.
Before a new model goes on sale, car companies conduct customer research “clinics” to ascertain how much they can charge for a vehicle.
Typically, prices start high – to test market acceptance – and get trimmed when customers don’t initially take the bait.
Historically, customers – not car companies – set prices for new cars.
But that’s not the case today.
In one example typical of large metropolitan showrooms, car dealers are writing about 100 orders a month and are only able to deliver about 30 vehicles – from orders placed months prior.
For the past 12 months or so, dealers have reaped the benefits of high demand and weak supply – by selling cars at full retail and with little to no discounts.
Gradually, the car companies themselves have also started licking their lips – and crunching the numbers on their calculators.
One by one, most major car companies have in recent months announced price rises across their model ranges.
In some cases, prices have risen by $200 or $300 – though many price rises are closer to $2000 to $4000.
In-demand vehicles have seen price rises of $7000 or more.
The price rises are compounded by the fact dealers are charging full retail, and there are few drive-away deals.
All of the above factors have combined to create record high car prices and lengthy waiting times.
If you’re after a deal, pump the brakes, be patient, and wait for supply to return to ‘normal’ – whenever that may be.
Mid-way through last year, industry analysts predicted stock shortages would subside by the middle of 2022.
The latest estimates forecast new-car delivery delays could continue to the end of this year and spill into next year.
What to do? Get in the queue
Amid the new-car shortage, the Australian Automotive Dealers Association (AADA) has join the chorus of industry bodies that have apologised to customers stuck in the queue – and pleaded with them to be patient.
Unfortunately, delivery forecasts supplied to dealers are wildly inaccurate because the situation on the production line – and on shipping lines – changes daily and weekly.
Many dealers have stopped providing estimates on delivery times to customers because they have been left red-faced, and frustrated buyers.
But dealers are only working with the sketchy information supplied to them.
“We are as frustrated as many of our customers are,” AADA boss James Voortman told Drive. “Unfortunately the current new-car shortage is beyond our control and we are doing our best to keep our customers updated, but unfortunately that information is subject to change.
“Our advice to customers remains the same as it was at the beginning of this unprecedented shortage,” said Mr Voortman. “If you want to buy a new car, please place and order get in the queue so when stock does arrive we can get you into a new car as soon as possible.”
Some customers have vented their frustration to dealers, however it is worth noting showroom staff don’t get paid until the car is delivered. They want to get you moving as quickly as you do.
The post Top 5 reasons for new-car delays and price rises appeared first on Drive.
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