Houston-area dealerships saw car sales through October rise 29.3% in 2022 compared to the last two years during the same time frame, according to the Greater Houston Partnership, despite a semiconductor chip shortage and low inventory that have challenged local dealerships over the last several years, industry leaders said.

“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.”

Several local dealerships said they have experienced low inventory levels alongside high demand with increasing vehicle prices and a chip shortage that affects how many cars can be produced by manufacturers.

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.

Donnie Buckalew, who co-owns Buckalew Chevrolet in Conroe, said in 2021 and through the early part of 2022, around 95% of his inventory was presold, meaning many of the cars on his lot were already purchased.

“We were selling everything we were getting,” Buckalew said in an interview. “So if we could have gotten 10 more, 20 more, 100 more [vehicles], we could have sold them too because the demand was so high.”

Locally, Honda of Tomball managing partner Lenny Gonzales said in an interview he has around 30 new cars available, whereas this time last year he had around 200.

“It’s a pretty significant difference on inventory shortage,” Gonzales said. “But because of the shortage, you’re selling them quicker and for a higher margin. So that’s been one of the benefits.”

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.

“I think on used cars [the price is] 11-15% higher than a year ago,” Gonzales said. “You might be as high as 20% on certain new car models, given the rarity and the market the way it is.”

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.

But the price increases are also benefiting consumers, Gonzales said.

“I’ve got clients I sold a new car to two years ago, and they’re actually trading their car in today with 30,000 miles for what they paid for [it] two years ago,” Gonzales said.

However, inventory levels are getting better, Buckalew said.

“Right now, we’re up to 50-something [vehicles],” Buckalew said. “We are getting cars in now that are not sold, so we do have inventory to show people when they come in looking.”

Poulos also said his inventory had started increasing in the last 30-45 days as of an Oct. 26 interview.

Still, 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, 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 to 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.

Chip shortages are also having an effect on the vehicle repair industry. In an email, Brad Fink, the corporate vice president of training and franchise development at Christian Brothers Automotive, said supply chain issues are improving for a majority of repairs, but not all.

“Some of the main parts that are harder to come by with longer turnaround these days include the semiconductor chip and steel parts,” Fink 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.”