PRESIDENT-ELECT’S MESSAGE: INVENTORY SHORTAGES

RE: Inventory Shortages

BY WASIM AZZAM, WSIADA BOARD PRESIDENT-ELECT

Carvana, known for its multi-story vending machines, is the fastest growing online used car dealer in the United States. Based in Arizona, the company went public in April 2017. In 2020, Carvana sold 244,000 vehicles and posted an annual revenue of almost $5.6 billion. As of January 2022, Carvana was the fastest to sell one million vehicles online and the fastest used car retailer ever to sell over 400,000 vehicles in one year.

Preowned car dealers all over the country have already for the past two years been struggling trying to find good inventory to satisfy their lots because of the shortage caused by the pandemic, but things are about to get worse. Carvana is already in the process of acquiring ADESA, the second largest wholesale vehicle auction solutions in the US with its 56 locations. The proposed transaction will provide significant infrastructure and team to expand, enhance Carvana’s customer offering with a broader selection of vehicles, and the ability to buy and sell at lower prices.

Experts say that 78% of U.S. population will be within one hundred miles of a Carvana inspection and reconditioning center once ADESA’s 56 U.S. sites are fully built within Carvana’s production network. That means customers will have access to more vehicles with faster delivery times than ever before. Also, with full utilization of ADESA reconditioning operations, Carvana’s annual production capacity is expected to expand from about 2M to over 3M.

In 2019, about 39.4 million used vehicles were sold in the U.S, and in 2021 that number increased to 40.9 million; therefore, Carvana alone will have about 7-8 % of the used car market share. If we add CarMax and AutoNation (for example), the number will be much higher, meaning used car dealers will be facing even tougher challenges finding inventory. More competition amongst dealers of all sizes and more demand for used cars but not enough inventory for everyone will for sure drive prices up.

People may ask why the computer chip shortage is there? The answer is that auto manufacturers canceled semiconductor orders in the initial stages of the coronavirus pandemic. When the economy started to improve, getting access to those materials proved exceedingly difficult because they were already allocated to consumer electronics by chip suppliers.

Unfortunately, analysts predict inventory may not return to pre-pandemic levels until 2023. Many chip suppliers are located overseas, and it has not been easy for the U.S. to build more semiconductors domestically. While there are efforts by the government to get this to happen, it will take time. On January 25th, the U.S. Commerce Department reported that median inventory for semiconductor chips had fallen to just a 5 days’ supply, compared to 40 days before the pandemic. Major semiconductor companies do not expect the situation to go away within the next 6 months.

I think it is fair to say that car dealers should continue to be prepared and understand that the inventory shortage problem is not going to go away soon or at least before the end of 2022. n

EVENTS CALENDAR

ANNUAL CONVENTION

June 13 – 15th

Campbell’s Resort at Lake Chelan 104 W Woodin Avenue Chelan 98816

TITLE WORKSHOPS

(Virtual Meetings) April 20 – 9:00am-12:00pm wsiada.com/title/April2022

May 18 – 9:00am-12:00pm wsiada.com/title/May2022

CHAPTER MEETINGS

April 5 – South Sound 7:30am – 10:00am Griot’s Garage 3333 S 38th St. Tacoma 98409

April 12 – North Sound 7:00pm – 10:00pm Courtyard Seattle-Kirkland 11215 NE 124th St. Kirkland 98034

April 13 – North Cascade 7:30am – 10:00am Drager’s International 1645 Walton Dr. Burlington 98223

April 19 – Spokane 6:00pm – 9:00pm Hilton Garden Inn 9015 W Highway 2 Spokane 99224