Chip shortage pressuring Jamaican car market

The worldwide shortage of semi-conductors, or chips, used in computers and other electronic systems, is starting to affect the Jamaican automobile market, but in a different way from many other countries.

Despite supply challenges, more people are said to be snatching up whatever new cars they can get, but are being hampered by longer lead-times for deliveries, especially for premium cars.

The supply challenges are also causing those persons who normally change cars after two or three years to hold them longer, putting upward pressure on the price of ‘newer used cars’.

“The newer two- and three-year-old cars are horrendously expensive. Owners of those cars are reluctant to purchase a new one since there is nothing to replace it or they will take a long time in coming,” said Andrew Jackson, managing director of preowned car dealership Jetcon Corporation.

President of the Jamaica Used Car Dealers Association, Lynvalle Hamilton, agrees, saying the value proposition for used or preowned cars is becoming harder to justify.

“The prices are ridiculously high. At the prices being quoted it makes no sense to buy the particular vehicle you want or those vehicles that the banks will finance,” Hamilton said.

Data from industry tracker CarGurus, in its June to December 14 report, put the average price increases for a used car in the United States market at 32.66 per cent.

Among categories of vehicles, some of the average increases were pickup trucks 21.47 per cent; convertibles at 22.82 per cent; vans 54.20 per cent; and budget cars, such as sedans and hatchbacks, 32 per cent.

“We never saw this coming, but we nonetheless stocked up and that has left us in a better position than a lot of dealers,” said Hamilton, speaking of action taken by his own dealership Auto Channel Limited.

He and Jackson both say used-car dealers are shying away from the ‘newer’ used vehicles.

“These vehicles are very expensive and this is made worse by the level of international competition,” Hamilton noted, adding that customers are resorting to older models that are imported on special licences for vehicles that are 10 years and older.

The dynamics at play in the used-car market, though spurred by phenomena in the new-car market, are not the same. The latter is more affected by the output of carmakers, whose production schedules in turn are held hostage to the chip shortage.

“For Jaguar/Land Rover, we’re having increased wait time for deliveries; for Mercedes, we’re having restrictions on option content, extra time for deliveries and the hottest models are in short supply,” said Stewart’s Automotive Group CEO Duncan Stewart.

Stewart’s Automotive represents Jaguar, Land Rover, Mercedes-Benz, Suzuki and Mitsubishi, among other brands.

The standard delivery for cars is about four to six months, depending on the source of the car, but now the company has to add about six months, for a total wait time of 10 to 12 months for deliveries of premium vehicles, Stewart said.

He added, however, that the brands targeted at the mid-market and budget segments are holding steady for now.

“For Suzuki, we’re having very minor impact except in the area of lead-time for deliveries; and the same for Mitsubishi,” he said.

For the ATL Automotive Group, which carries a diversified range of cars, from ultra-premium Porsches to premium BMW and Audi, and mid-market VW, Kia and Honda: “Pretty much every car brand in the world has been affected by this shortage of semi-conductor parts,” said company representative Stephen Hector, adding that the situation is expected to continue into next year.

The usual lead time varies per brand, he added, saying it could be three months for one and seven months for another.

“What we’ll do is to work with our manufacturers to get as much as we can to satisfy demand, locally,” Hector said.

Over at Magna Motors, dealers for Hyundai, Marketing Manager Etmour Williams says they have not yet been affected by long lead-times or shortages because of their planning cycle.

“Like everyone, we’re faced with a supply challenge brought on by the shortage of computer chips worldwide, but what we’ve done is to plan ahead, do our projections and matched that with our orders,” Williams said.

Magna Motors Jamaica already has 200 of the 2022 car models on hand to satisfy increasing demand, he added.

The real source of the higher prices for used cars in Jamaica, according to JUCDA President Hamilton, is the declining flow of vehicles from the Asia-Pacific and Japanese markets, plus rising prices, especially for two- to four-year-old vehicles sourced from those areas.

In the Japanese market, for example, used-car prices were reported by one tracker as being 21 per cent over the 2019 baseline, as at September.

Added to this is the cost of shipping and delays.

New-car dealers like Stewart’s say its better to put in orders now than to wait; while used-car dealers are shying away from late models in favour of four- to 10-year-old used vehicles, while holding prices in check.

“The shipping is causing a number of dealers, especially the smaller ones, to be low on stock. They are having to deal with two months’ additional lead time to secure orders or to restock. Some have had to be purchasing locally or otherwise securing stock through other dealers,” said Hamilton.

Over at Jetcon, Jackson says they’ve stocked up but are bracing for a shortage.

“We’ve been holding the prices simply because we’re selling the older models. There is no telling how long that will last. Things may change next year but only for the worse, I’m afraid,” Jackson said.

neville.graham@gleanerjm.com