“I feel like dealers in general have been pretty resilient,” said Chris Poulos, chair of the Houston Automobile Dealers Association, in an interview. “We made it through COVID[-19], and we’ve made it through this chip shortage up to this point.”
Low inventory, high prices
Poulos, who is also the executive vice president of West Point Lincoln, West Point Lincoln of Sugar Land and West Point Buick GMC, said he experienced his lowest inventory levels over the summer.
“We were barely scraping by as far as inventory [was] concerned,” Poulos said.
Bob Milner, a member of The Woodlands Township board of directors who also owns Dodge Jeep Ram dealerships in Nevada, said demand has been particularly steep for used cars.
“We pretty much have been in an inventory-constrained environment since the pandemic,” Milner said. “For the last year the used car market was on fire, and prices were going up every week.”
In October, the average vehicle price in the Greater Houston area was $51,518, which is $2,700 more than the average car price in October 2021, according to the Greater Houston Partnership.
Aside from cost, financing also affects car sales, Milner said.
“One of the things affecting [sales] right now is the inflation factor,” Milner said. “Instead of a car loan for 3%-4 % they are in the 8% range, and that puts it out of [customers’] monthly budget.”
Roshelle Salinas, the executive vice president of the HADA, said the prices are set by the manufacturers.
“Those prices are being set based on the inventory availability and the high demand that exists today,” Salinas said.
Another challenge is that not as many leases are turned in, making availability of preowned cars more challenging, said Fred Gallucci, general manager of Mercedes-Benz of The Woodlands.
“There’s demand all across the board,” Gallucci said. “Right now the average age of the vehicle on the road is over 11 years old.”
Gallucci said his dealership scours the country for vehicles to buy to keep its preowned inventory at a consistent level. New car inventory is different, however, he said. “We started with a business that would have three months’ worth of vehicles setting on the ground at any particular time to [having] almost no inventory at times,” Gallucci said.
Salinas said she believes inventory levels may not improve until late 2023.“This is mostly because of the supply chain issues that are still ongoing from COVID[-19], the Ukraine war, inflation—all of those aspects that are impacting the whole globe,” Salinas said.
Semiconductor chip shortage
For supply chain issues, Salinas said the chip shortage is No. 1.
“Vehicles have anywhere from 1,000-2,500 chips in them,” Salinas said. “So depending on the type of vehicle you want, you’re going to see it being more readily available the less chips it has.”
Out of the products that use chips, automobiles make up 12.4% of consumer demand, according to the Semiconductor Industry Association’s 2022 Factbook.
However, Milner said one positive result of the shortage has been to bring technology up to date across the board for manufacturers.
“I will say that overall the chip situation has been good for the automobile business, because it’s forced manufacturers to bring all their technology current,” he said.
Poulos said he does not see the chip shortage and supply chain issues ending anytime soon.
“I still think we’re going to have some of this supply shortage of chips and just supply chain issues for potentially another 12 months,” Poulos said.
Looking ahead, Salinas said she thinks inventory will stabilize.
“It won’t be 1,000 vehicles on dealership lots anymore,” Salinas said. “It will definitely be a little more [of vehicles being] less available on the lot itself and more towards order ahead in advance.”
Car sales in 2022 through October in Houston were at their highest since 2015.
