A global vehicle shortage has caused delays across Canada for those on the hunt for a new car, with no end in sight until 2023.
“Consumers have to be habituated and educated to the fact that there’s not the usual lot full of cars to choose from,” Huw Williams, national spokesperson for the Canadian Automobile Dealers Association told Global News.
“The shortage of automobile vehicles in Canada is part of a worldwide phenomenon. There is an absolute worldwide shortage of vehicle production at the moment,” he said.
At the beginning of the year, the association believed the delays would subside by the end of summer.
However, they no longer say this will be the case.
“We’re actually now predicting it’s going to be into 2023, that there’s going to be this unusual period of delay,” said Williams.
Jesse Waddell, from Calgary, hoped to be able to sit in a vehicle — feel it, touch it, and maybe even go for a test drive in it — when visiting the dealership to search for a new car earlier in April.
“(Dealerships) really don’t have anything. You might be lucky to find one vehicle that’s even in the model you want, but forget the trim and all the other fixings,” Waddell told Global News.
Most dealers told Waddell it would take up to a year to get a new vehicle.
By taking the safe route and trading in his truck, Waddell now has a few months wait ahead of him before his new Kia arrives.
“Hopefully two to three months,” he said. “But still no guarantee.”
No vehicle manufacturer is immune to this shortage.
“It’s not one region of the country. It’s not one dealership or one brand. It’s everywhere,” Williams said.
In the first quarter of this year in Canada, 43,061 Fords were sold. A total of 47,699 GM vehicles, 35,523 Toyotas, 12,919 Mazdas, 26,692 Hyundais and 9,396 Volkswagens were also sold during this period, according to a market snapshot from DesRosiers Automotive Consultants.
Last year, Canada produced just over 1.1 million light vehicles, according to DesRosiers. This is the lowest level of production since 1967.
The low production numbers, down from 1.4 million in 2020 and close to 2 million in 2019, came as the auto sector globally was hit by a shortage of semiconductor chips caused by pandemic-related production issues and a surge in demand for electronics.
Chip shortage
One of the main reasons for the delay in car deliveries is due to the global chip shortage, according to Williams.
“When semiconductor chips become in short supply, it can cause havoc,” he said.
“The shortage has really put things behind during the pandemic. We’re a highly integrated industry, so when shortages occur in one element of production, it cascades into other elements.”
Ford Motor Co F.N confirmed April 28 it will halt production in May at its Flat Rock, U.S., plant where it assembles the Mustang because of a shortage of semiconductor chips.
Ford said on April 27 it had built about 53,000 vehicles but not shipped them as they awaited final parts held up by the chip shortage.
Chief Financial Officer John Lawler said the continued chip shortages hit the company hard, especially on its large and most profitable vehicles — the F-Series pickup and Expedition and Navigator SUVs.
“The capability of this business is much stronger than what we were able to provide in the quarter and that was due to the constraints,” Lawler said.
The shortage of semiconductors has also forced Gothenburg-based carmaker, Volvo, to cut vehicle output despite a strong demand.
As for many companies, the war in Ukraine has resulted in higher costs for raw materials, energy and freight — Volvo being one. It is now seeking to mitigate the effects by adjusting prices.
Supply chain problems
Supplier countries are facing issues due to ongoing supply chain problems which is also causing a delay for buyers around the world.
“We’re seeing it out of Asia. We’re seeing it certainly across North America. And of course, the challenge for consumers is it’s forcing them to wait,” said Williams.
Even manufacturers like Hyundai, Honda and Toyota, that are known to dominate the Canadian car market, are feeling the effects.
Honda, for instance, saw a decrease of 18 per cent in sales during quarter one compared to last year, while Toyota was down by 15.1 per cent.
“Hyundai is contending with the same supply chain issues facing the entire automotive industry,” Jennifer McCarthy, national manager of public relations for Hyundai Canada, told Global News.
“We remain focused on providing an optimal customer experience and will continue to navigate this to the best of our ability,” she said.
Demand in Canada
As supply chain issues remain dominant, demand has not slowed down — specifically in the Canadian marketplace.
“We certainly saw a strong demand during the two years of the pandemic, and we projected to be strong throughout the year of 2022 into 2023,” said Williams.
“Part of that is Canadians have an older fleet than there is in the United States, as an example. And as a result, Canadians are looking to turn those vehicles over and make sure they have the right fit for their family.”
And, the strong demand has only made delays worse.
“The fact that demand is really so strong, is continuing to push the pipeline to it to its max,” said Williams.
“Consumers will see it as they visit showrooms.”
War in Ukraine
The over two-month-long Russian invasion on Ukraine has also had an impact on the global car shortage.
“This is a relatively unusual year where we have a war in Ukraine,” said Williams.
“A lot of people wouldn’t realize that Ukraine is actually a producer of automotive parts that are quite important for a number of manufacturers.”
Russia and Ukraine are key exporters of neon, palladium and platinum, all of which are critical for microchip production.
About 90 per cent of neon, which is used for chip lithography, originates from Russia, and 60 per cent of this is purified by one company in Odesa.
A shortage of wire harnesses produced in Ukraine delayed the launch of Volkswagen’s electric ID.5 from April to May and as Russia’s invasion also sent costs of materials and fuel surging and Tesla again increased some vehicle prices at the beginning of April.
Used car marketplace
Those on the hunt for a used vehicle will be paying a premium as prices have also increased due to less supply and more demand.
Many dealerships have put a call out for used vehicles to keep up with potential customers as many private sellers are listing at increased costs.
“There’s lots of people that are very happy. They’re saying, ‘My car was worth $30K, now it’s worth $35K,’” Gerry Duffy, who teaches supply chain management and logistics at the Southern Alberta Institute of Technology, said.
“The downside to that is once you’ve sold your car for 35K, then you need to get another car,” he added.
Advice for car-buyers
The secret for consumers is to understand the current challenges the auto-industry is facing, according to Williams.
“I would just caution that for consumers, plan early, start the process early, and be flexible,” he said.
“The good news in the Canadian auto industry and for the dealers is that we’re still rolling cars across the curb every day.”
— with files from Global News’ Tomasia DaSilva, Reuters and The Canadian Press
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