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Why pickups, SUVs are getting prioritized over passenger cars as chip shortage continues

Why pickups, SUVs are getting prioritized over passenger cars as chip shortage continues


Why pickups, SUVs are getting prioritized over passenger cars as chip shortage continues

Used Cars In High Demand.Normally I would keep 30-50 trucks in stock. Right now, I have a hard time keeping 20,” Chris Spears said Wednesday. “The problem with the chip shortage is that new car dealerships are having to sell used cars because they can’t get new inventory.”Doug Engle, Ocala Star-BannerMichael Petrilla is a lifelong Chevrolet fan whose patience is being tested.Petrilla, 65, has been waiting for his dream car — a blue 2021 Camaro SS 1LE with a manual transmission — to arrive at his home in New Jersey since he ordered it in April.Petrilla, who plans to retire in 18 months, said the car is his retirement gift to himself. it was built months ago, yet it sits — along with hundreds of other Camaros — parked near a General Motors plant in Lansing, Michigan. The cars are awaiting the final semiconductor chips needed to complete their production.It’s been a long wait. The auto industry is in the midst of a global shortage of semiconductor chips used in cars. When GM and other carmakers do get the chips, they direct most of them to the in-demand and profitable vehicles — pickups and large SUVs, leaving some car buyers such as Petrilla exasperated.“Every day that goes by and they put a chip into a pickup truck instead of my Camaro, I get frustrated and I think about moving on to something else,” Petrilla said. “I think about it every day. Because I’m a die-hard Chevy fan, I wouldn’t buy a Mustang, but I think of a Dodge Challenger or a used Corvette C7 Grand Sport.”Automakers such as GM can’t do much to speed up production of the chips. In fact, the shortage could go until the middle of 2023, the tech company Intel warned last week. Studies and GM dealers both indicate that most customers understand that and are patient.But experts say automakers should still do intense crisis management with customers who order a car instead of a pickup or SUV because if those customers switch brands, they could be lost forever.The bottom lineGM confirms that Petrilla’s order is still waiting for “a module completion.” But since the USA TODAY Network’s Detroit Free Press contacted GM, the order has been “added to the list to prioritize.” The automaker won’t confirm specifics, but plant sources have told the Free Press tens of thousands of various cars, trucks and SUVs have been parked around the country this year awaiting chips for final assembly.As for crisis management, GM is relying on a war room of supply-chain managers who are working day and night to procure chips and get them to priority vehicles as fast as possible. “Chip issues are unfortunately cascading across all product lines,” said David Barnas, GM spokesman. “But our goal remains to get as many vehicles in customer’s hands as fast as we can. This includes making every attempt to prioritize sold orders at our plants, and completing unfinished vehicles as chip availability allows.”Since early this year, the auto industry has had to either idle assembly plants or build vehicles shy of the chips parts as it navigates this crisis.The chips, made mostly in Taiwan, are in tight supply after the COVID-19 pandemic forced many people to work remotely and home-school their kids. People needed laptops, cellphones and other devices to do that. Those devices use the chips.Car production had halted and dealerships were closed for many weeks last year, so most automakers stopped ordering the chips. When things opened up, car demand soared, but chips were already being sold to nonautomotive customers. GM has tried to protect production of its popular and profitable full-size pickups, but GM has had to halt most pickup production in North America for this week. Four of GM’s North American plants that build midsize SUVs, including Lansing Delta Township Assembly, remain down too, because of the chips shortage. Petrilla, who put $1,000 down on the $46,000 Camaro he ordered, said he understands the challenges GM faces and why it would prioritize pickups and full-size SUVs. But he said that plan is not customer-focused and that GM should take care of the vehicles it has customers’ orders on first. “It’s all concern with the bottom line. They have prioritized their biggest sellers to get all the chips and those go to their bottom line,” Petrilla said. “Yes, those vehicles will go right out the door, but why isn’t Chevrolet taking care of customers like me who already put money down?”A shoulder shrugAbout four years ago, consumer tastes shifted from cars to pickups and SUVs, prompting automakers to reconsider their priorities. Ford Motor Co. has largely eliminated cars from its lineup and GM has scaled back too, killing the Chevrolet Cruze subcompact and the Chevrolet Impala sedan. As much as GM is working to please all customers, it is in a bit of bind, some experts say. “This is one of those situations where GM is probably just going to shrug its shoulders and say there’s nothing it can do,” said John McElroy, host of “Corvette customers have been pulling their hair out since last year because it’s almost impossible to get one.”Customers for Corvettes will probably wait it out because, “no one else offers that kind of car at that price,” McElroy said.”But others will probably turn to GM’s competitors,” McElroy said. “Even so, other automakers also have tight inventory. Subaru is actually worse off than GM with only a 10-day supply of cars, compared to GM’s 18 days.”Publicity helpsMany consumers have been tolerant of the situation, said Paul Zimmermann, vice president and owner of Matick Chevrolet in Redford.“I’ve got a Corvette customer that is not too happy that their car has been delayed, but, that said, Corvette has been delayed for other reasons too, so it’s hard to say that’s just allocated to microchips,” Zimmermann said. “It’s gotten so much publicity that most people are aware of it. So that level of frustration that would come from it — I don’t think we’ve seen that much.”Zimmermann said there’s frustration in general that inventory is short across the board. But the lack of stock isn’t hurting his sales.He expects that Matick Chevrolet will sell 300 new vehicles for July despite starting the month with only 100 vehicles in stock. That’s because the salespeople are preselling every vehicle that is in transit to the dealership. Those customers who opt to order something to specification, usually a Corvette, Blazer SUV or pickup, know they will have to wait.“We’re really trying to educate them up front that, ‘We can’t guarantee you when this will come in because it’s so fluid,’ ” Zimmermann said. “But most of those who order have a pretty good understanding of the situation.”In the last week of April, Cox Automotive did a “snapshot” survey of 266 in-market shoppers who were intending to purchase a vehicle within a year. It found that most car buyers were aware of the chips shortage and expected to pay higher prices and have less selection.Cox’s report said that despite the higher prices, lower inventory situation, most in-market shoppers did not expect to delay their purchase, nor shift their consideration to other segments. The report said that 81% of in-market shoppers were staying committed to their intended vehicle segment and only 19% were willing to consider another vehicle category.Crisis managementBut as time goes on, consumer sentiment is fickle, warned Christopher Tang, a business professor who specializes in supply-chain management at the University of California, Los Angeles.”The pickups and SUVs are important for revenues, but you don’t want to lose car buyers to another brand,” Tang said. “They might buy a car when they’re young, but if they have a family later, they may want an SUV. If they’ve switch brands earlier, you lose them forever. It’s crisis management versus a long-term loss.”Tang said there are some remedies automakers can do to keep customers loyal. Transparent communication: Let customers know there’s a delay and offer a discount on the vehicle or a voucher for maintenance if they order the car now and will wait.Offer the customer a used car for use until the vehicle they ordered is available. “If you don’t do anything, you lose them,” Tang said.Petrilla, whose first car was a 1974 Z28 Camaro that he bought when he was a teenager, admits that despite his frustration, he will wait it out a bit longer.”I understand the chip shortage and it’s not GM’s fault and all automakers are under pressure so I will give it more time,” Petrilla said. “But I am very disappointed that they’re not more customer-focused.”Follow Detroit Free Press reporter Jamie L. LaReau on Twitter @jlareauan.

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