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Chip Shortage Leading to Higher Grosses for Dealers

Profits at AutoNation Inc and Lithia Motors jumped 61% and 33%, respectively, in the first quarter of 2021.

The global semiconductor chip shortage, which has forced the closure of North American factories in recent weeks for GM, Ford, and Toyota, has buoyed the gross profits of auto dealers across the country.  Dealers, due to a lack of ongoing supply, can more easily retain MSRP for their best-selling cars, sell cars on order pending completion on the assembly line, and can reduce promotional spending due to high demand for new and especially used cars.  This has led to record profits for auto dealers, which may last into 2022, with some dealers having only 15 days’ worth of supply of new vehicles.  Caveat: while times are very good now if supply does not pick up soon, dealers are at risk of running out of new car inventory in the future.

Read the Reuters article


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