Local auto dealers detail struggles, operational challenges (2022)

New car dealers in Kerrville all agreed that the past two years have been very challenging because of low inventory and supply issues.

“A lot of the trucks we’ve ordered, Ford can’t build because of supply chain issues,” said Mike Dawson, new car manager at Ken Stoepel Ford. “We had to stop taking orders on many vehicles. Some of the order banks have begun to open up again so we can order again now.” Stoepel only has the one dealership in Kerrville.

The biggest supply chain issue for car manufacturers has been with the pandemic shutdown and shortage of microchips for the car computers that come from China and Taiwan.

“Vehicles are still slow coming in, but the last online meeting we went to said the inventory would be moving more into the bigger cities and would trickle more into the rural areas,” said Jim Villcheck, general sales manager for Crenwelge Motors in Kerrville. In addition to a GMC dealership in Kerrville, Crenwelge Motors has a Chrysler dealership in Fredericksburg.

Inflation and the recent increase in interest rates can also have a negative impact on the car market, both new and used.

“Anytime you have increases in the price of gas, groceries and other items, it takes people a little time to adjust. Once they get used to a new norm, things will improve. Five percent interest on today’s cars is still a low rate. We got accustomed to the low rates, but people will adjust,” Villcheck added.

“When gas prices go up people trade in their big vehicles, and six months later they come back and get the bigger vehicle again,” he added.

Both Crenwelge and Stoepel are seeing lots of people ordering new vehicles rather than buying existing inventory from the sales lot.

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Dawson said his sales staff at Stoepel sold 93 vehicles during the month of July, 70 of them were ordered and the remaining 23 were sold off the lot.

The used car market has also been impacted during the pandemic with trade-in values rising to unheard of highs.

“People who used to buy new cars are buying used cars,” Dawson said. “We are actively trying to buy used cars locally rather than buying at auction.”

Dawson said building the car lot across Sidney Baker from the main dealership has really helped with maintaining a larger used car inventory.

“It’s not a bad time to buy a new vehicle. You can order and get what you want if you’re willing to order one,” Dawson added.

Villcheck predicts the used car business will continue to grow because of the higher trade-in values.

“I think it will adjust this fall, but I don’t know how much. Probably the used car prices will stay higher because the cost of new vehicles are higher,” Villcheck added.

The move toward electric vehicles (EVs) in the Hill Country has begun with Ford dealers receiving both F-150 and Ford Mustangs. Stoepel has sold three pickups and four or five of the Mustangs.

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“We’ve taken some Tesla cars in on trades, but they have already sold. Ford will begin manufacturing more new EV models in the future.”

Stoepel has two EV chargers outside their building, but Dawson said Ford Motors corporate is encouraging buyers to install a home charger. The charging cord comes as standard equipment on the new Ford EVs.

Currently Crenwelge has no EVs available, but expects to get both GMC and Chrysler products in EVs soon. KPUB is installing Level 3 chargers at the dealership.

“Lots of changes with EVs. Everybody is concerned about the sustainability of the electric grid all over Texas,” Villcheck said.

Crenwelge is already getting some of the 2023 models of Chrysler, Jeep and Dodge into the dealership and the EVs are coming, over half of the vehicles.

“Who would have thought a Jeep Wrangler would come in electric, or a Hummer? It will be funny to walk around at the front of a truck and put your luggage under the hood,” Villcheck added.

Cecil Adkission Automotive Group is a much larger group of multiple dealerships with locations in Burnet, Hondo, Uvalde, Del Rio, Orange and Kerrville.

Trey Adkission, general manage of the Kerrville dealership, said the new and pre-owned car inventory at all of the locations is about one-tenth of what they normally have.

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“We normally have 80 to 100 new cars on the lot and 100 to 120 pre-owned in Kerrville,” Atkission said, “but now we have 60 to 70 pre-owned. We have become much better at managing the pre-owned inventory.”

Adkission said, like the other local dealers, that the bulk of the vehicles being sold are pre-ordered.

He said that the price of the pre-owned vehicles may decrease depending on the make or model. About 40 percent of the pre-owned vehicles are coming from trade-ins and the other 60 percent come from auctions or people locally who may be disposing of a third vehicle that they no longer need. Prices are higher on used vehicles with more accessories, and the basic trim vehicles are more impacted.

“We are purchasing used vehicles from previous customers because they are worth more than ever now,” Atkission said.

Atkission said the biggest problem right now is getting the vehicles that customers have ordered from the manufacturer delivered in a timely fashion.

Like the other two dealers, Atkission said finding qualified mechanics for the service department has been a challenge. All of the dealers train in-house as well as sending them to the manufacturer’s training for specific vehicles.

To combat the rising prices for new vehicles and supply issues, manufacturers are looking for ways to dispose of existing inventory as well as new vehicles.

“They have two levers they can pull. One is incentivized interest rates and the other is rebates,” Atkission said, “and right now they are leaning toward the incentivized interest rates, particularly General Motors.”

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Electric vehicles have been available at Atkission’s GM and Ford dealerships for several years but the dealerships are now ready to be more aggressive in bringing the vehicles to the market.

“It’s been interesting how customers have responded to the EVs. It seems like what you read in the news stories and what manufacturers say sounds like the segment is bigger than it really is. We haven’t seen customers tearing down the door wanting to buy an EV,” he added.

Atkission said more people are concerned about not being able to buy combustible engine vehicles (gas and diesel) in the future and ask when will be the last time they can buy a vehicle, rather than being interested in buying an EV.

“We are selling every EV we get, averaging about 10 a year from our Kerrville location. We have had Chevrolet EVs for several years, first the Volt and now the Bolt since 2017,” he added.

As far as the supply of vehicles coming to the dealerships, Atkission said the manufacturers have a tier system based on the sale volume of dealerships so, generally, dealers in metropolitan areas get more product and sooner than the rural dealers.

Kerrville is the largest market among the Atkission dealerships in sales volume but the markets in Orange, in east Texas, and Burnet are actually larger markets.

“If we have a new vehicle on the lot more than 15 days old then we’re wondering what’s wrong with it,” Atkission added.

According to the Wall Street Journal, quality is among the most carefully watched information people use when they buy cars. Several companies publish widely regarded research on quality. These are led by J.D. Power and Consumer Reports. Poor quality ratings can keep people out of a manufacturer’s dealerships, and drive them to other brands.

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The car industry will likely continue to suffer from parts shortages due to the supply chain issue in the near future, causing sharp price increases for buyers. On Aug. 12 Ford announced an $8,000 increase on their new EVs because of the increased cost of batteries for the vehicles.

According to the WSJ, as more cars become available, people will be able to shop for, and buy cars, more quickly. Quality problems, including numerous recalls, may keep some car manufacturers from benefiting from the brisk increase in supply and resulting sales.

FAQs

What are the challenges of car dealers? ›

Whether you're a salesperson, sales manager or general manager, working at a dealership has many challenges.
...
The Biggest Challenges Dealerships Face in 2021
  • The Economy. ...
  • Customers Changing Expectations. ...
  • Ride-Sharing Apps (Uber & Lyft)

Are car dealerships struggling? ›

Prices of cars both new and old have skyrocketed, as a large number of dealers struggle to keep stock on their lots. Despite the pandemic-driven lack of choice on the market right now, not every vehicle is able to attract willing customers. These are the 2022 model year vehicles that dealers can't move off their lots.

What is the future of car dealerships? ›

The future of automotive retail will be shaped, led, and won by dealerships that prioritize efficiency—in both customer-facing and behind-the-scenes operations. The time is now to implement technology solutions that enable streamlined, in-store experiences for customers and an efficient model for internal operations.

What is causing supply chain issues with cars? ›

This is mostly due to the COVID-19 pandemic shutting down several important factories. Conflicts, disasters, and even extreme weather have further strained this supply chain. As automakers are struggling to secure enough microchips to build vehicles, they have had to reduce output or even modify their designs.

Can you return a car to a dealership NZ? ›

If one of your guarantees hasn't been met, you have a right to go back to the dealer for a repair, and if circumstances permit, a replacement or refund. You are not covered by the CGA if your vehicle is: bought from a private seller. bought for business use and the dealer has contracted out of the CGA.

Why is there a shortage of vehicles at dealerships? ›

The inventory shortage can be attributed to the coronavirus pandemic and resulting supply chain disruptions. When COVID-19 brought the economy to a halt back in 2020, automakers canceled orders for semiconductor chips.

Why are car dealers low on inventory? ›

The industry lost 2.5 million sales in 2020 and another 2 million in 2021, so there are a lot of people waiting for a car. As the industry works through pent-up demand, it will be likely to see a 'one-in, one-out' system where vehicles are delivered [to customers] as soon as they arrive at dealerships.

Is there still a car shortage in 2022? ›

Is the Car Inventory Shortage Over? In short, no. Asbury Automotive Group, amongst other powerhouse publicly traded dealer groups, anticipates that new inventory levels will continue to remain low in 2022.

Are car dealerships becoming obsolete? ›

They most likely will even be around during the next decade. However, car dealerships are becoming increasingly obsolete, as various market disruptors are threatening their basic business model, thanks to the internet and cutting out the middle man.

What is current automotive industry trend? ›

Increased vehicle connectivity

As technologies including artificial intelligence, virtual reality and the internet of things (IoT) continue their growth, more connected services and features are expected in vehicles. There are various benefits integrating technology within automobiles.

What is the current role of an auto dealership? ›

Automobile dealers are the link between the manufacturer of the automobile and the U.S. consumer. With their large inventories of cars, dealers provide consumers with a wide array of vehicles to meet their needs at different price points.

What is the biggest challenge for supply chain in the automotive industry? ›

One of the top challenges for automotive supply chains, like other industries, is visibility. The automotive industry has an 81 percent concern rate, compared to 70 percent for all other businesses.

What is causing supply chain issues 2022? ›

Driver shortages, logistics provider capacity issues, inflation, shipping delays, increased freight costs, depleted inventory levels, labour shortages and demand peaks are driving discussions and require attention.

Why is there a chip shortage in 2022? ›

In 2022, there will be a worldwide chip shortage. This is due to the growing demand for chips in automobiles, laptops, and other electronic devices. The main reason for the shortage is that there are not enough factories to produce the chips.

How long after buying a car can you reject it? ›

Broadly speaking there are three time periods for rejection: within the first 30 days of purchase; after 30 days but before six months; and after six months.

What happens to new cars that don't get sold? ›

A final resort for the dealer with vehicles that don't sell at the dealership is to sell them at an auto auction. Most areas have auto auctions that are frequented by new- and used-car dealers.

What are my rights when buying a car from a dealer? ›

Problems with cars bought from dealers

(For a used car, “satisfactory quality” takes into account the car's age and mileage.) You have a right to reject something faulty and you're entitled to a full refund within 30 days of purchase in most cases. After 30 days, you lose the short-term right to reject the goods.

Will car prices drop in 2022? ›

Used car prices are already starting to drop as the market cools, having seemingly peaked in early 2022. On the other hand, new vehicle prices are unlikely to drop in 2022 due to persistent inflationary pressures. “There's still a lot of inflation bubbling up in the new vehicle supply chain.

Will 2022 be a good year to buy a car? ›

While soaring used car prices are bad for those who can't afford a new car, they may mean 2022 is a good time to buy a car for those with a vehicle to trade in. A high trade-in price means added capital that can help reduce the finance share of purchasing a new car.

Which cars are not affected by chip shortage? ›

Here Are Features Some New Cars Won't Get Because of the Chip Shortage
  • BMW: Touchscreen. BMW. ...
  • Marc UrbanoCar and Driver. ...
  • Cadillac: Super Cruise (Now Resumed) ...
  • Cadillac. ...
  • Chevrolet/GMC: HD Radio. ...
  • Chevrolet/GMC: Heated Seats and Steering Wheels. ...
  • Ford: Satellite Navigation. ...
  • Ford.
13 Nov 2021

How long will the chip shortage last for cars? ›

Following the COVID-19 pandemic, global vehicle production tumbled, but should recover to near pre-pandemic levels by the end of 2023.

Is the car shortage getting better? ›

With automakers scaling back their plans, Cox Automotive says, there is “no clear timeline for any notable recovery in new vehicle inventory levels.” Cox Automotive Senior Economist Charlie Chesbrough says, “Lack of supply is still the greatest headwind facing the auto industry today.”

Is car inventory getting better? ›

Inventory has hovered in that range since the start of the year, though supply is far below levels of the past. In 2020, new vehicle inventory at the end of July was 2.55 million units for a days' supply of 66. At the same time, in pre-pandemic 2019, it was 3.69 million for a days' supply of 88.

Is chip shortage Getting Better? ›

Intel Chief Executive Pat Gelsinger told CNET that he thinks we're almost through the worst of the chip shortage, which will last through the second half of 2021. He predicts it'll gradually ease through 2022 and fade in 2023. Mismatches in chip supply and demand have been common for decades, but not like this.

Are car chips still in shortage? ›

The chip shortage plaguing the auto industry since early 2020 probably will persist through 2023, a semiconductor industry analyst says.

Is chip shortage affecting car prices? ›

DETROIT (AP) — U.S. new vehicle sales tumbled more than 21 percent in the second quarter compared with a year ago as the global semiconductor shortage continued to cause production problems for the industry.

How many hours does a typical car salesman work? ›

Most car sales representatives work full time, or an average of 40 hours a week. A car salesperson's schedule may not be set, however. For example, a car salesperson may work from 9 a.m. to 5 p.m. Monday through Friday one week and then work from 11 a.m. to 7 p.m. Tuesday through Saturday the next week.

Which dealership sells the most cars? ›

In 2020, Rightway Automotive Credit was the leading car dealership in the United States based on the number of vehicles sold. Michigan-based Rightway Automotive Credit sold over 12,900 used vehicles in 2020.

What car manufacturer has the most dealerships? ›

Ford has the most number of locations with 2,990 locations across 50 states and territories. Chevrolet has 2,903 and Ram Trucks has 2,463 locations in the US. These three together make 38.48% of the largest 10 automobile dealers in the United States.

What is the most significant trend affecting the automotive industry at the moment? ›

Probably the most important trend in the automotive industry is the worldwide shift to electric vehicles (EVs). Searches for “electric vehicles” are up by 257% over the past five years. The IEA estimates that global EV sales exceeded 3 million units in 2020. That's over 4% of global vehicle sales.

How is the automotive industry doing in 2022? ›

U.S. auto sales are forecast to finish down 17.3% year over year; Cox Automotive revises its full-year 2022 new-vehicle sales forecast to 14.4 million units, down from 15.3 million.

What is the difference between automotive and automobile? ›

Both terms, automobile and automotive are related to vehicle industry. Automobile is a noun that usually refers to a four-wheeled automotive vehicle designed for passenger transportation whereas automotive is an adjective relating to motor vehicles. This is the main difference between automobile and automotive.

How can dealers improve service department? ›

7 Expert Tactics for Increasing Your Dealership's Service Revenue
  1. Keep the warranty going. Every dealership faces service defection. ...
  2. Build trust. ...
  3. Embrace technology. ...
  4. Offer auto repair financing. ...
  5. Earn trust and respect. ...
  6. Make service convenient. ...
  7. Measure your service marketing results.
19 Jul 2017

What are the responsibilities of a car salesman? ›

The car salesperson assists customers who are looking to purchase a new or used vehicle. They converse with customers to find out their budget and wish list, helping them find a suitable car that matches their needs. In addition to selling cars, the car salesperson orders and arranges payments with the shipper.

What is the highest position in a car dealership? ›

The General Manager

The dealership's general manager is the highest authority at the business. He or she presides over both the sales and service departments.

What barriers do companies face when beginning to supply engines to the automotive industry? ›

Research, development and other forward-looking functions. Utility costs to run machinery and maintain a healthy and safe working environment. Commodities costs for buying steel, aluminum, rubber, fabrics and other raw materials. Third-party costs from automotive suppliers, manufacturers and logistics providers.

How does the government affect the automotive industry? ›

As a result, government regulation also has a significant effect on the automotive business by generally increasing production costs while also placing limitations on how cars are sold and marketed.

What is supply chain in automotive industry? ›

The automotive and transportation supply chain involves all incoming and outgoing materials, services and parts that pertain to your business operations. This means that the success of your enterprise depends on the reliability and consistency of automotive manufacturing logistics.

What are the biggest challenges in supply chain 2022? ›

A nationwide shortage of truck drivers, a lack of available warehouse space, and rising consumer demand are three supply chain challenges that will continue to impact retail operations throughout 2022.

What is causing the supply chain crisis in the United States? ›

Supply chain problems emerged during COVID-10 lockdowns due to shifts in demand, labor shortages and structural factors. Evolving geopolitical factors are now causing new risks and pockets of stress. Affected sectors include metals and mining, chemicals, automotives, semiconductors and technology.

What are the major challenges for supply chain management in 2022? ›

Supply chain challenges in 2022
  • Material scarcity. Insufficient inputs have been a concern since the pandemic began, due to an abrupt rise in consumer demand like never before. ...
  • Increasing freight prices. ...
  • Difficult demand forecasting. ...
  • Port congestion. ...
  • Changing consumer attitudes. ...
  • Digital transformation. ...
  • Restructuring. ...
  • Inflation.
17 Mar 2022

Who is the biggest manufacturer of microchips? ›

Taiwan Semiconductor Manufacturing Co. is the world's largest semiconductor foundry. Pure-play foundries manufacture integrated circuits on behalf of clients. Many semiconductor companies outsource the manufacturing of their chips to Taiwan Semi.

Who makes computer chips for cars? ›

The global automotive semiconductor market size was estimated at USD 43.6 billion in 2021. Infineon, NXP, and Renesas were the biggest automotive semiconductor manufacturers.

Why doesn't the US make computer chips for cars? ›

While the chip shortage can be attributed to multiple factors, the COVID-19 pandemic is the primary cause. At the beginning of the pandemic, automakers shut down factories and temporarily paused vehicles production. Meanwhile, lockdowns and virtual work and school caused a surge in demand for other electronics.

Are car dealerships becoming obsolete? ›

They most likely will even be around during the next decade. However, car dealerships are becoming increasingly obsolete, as various market disruptors are threatening their basic business model, thanks to the internet and cutting out the middle man.

Are car sales slow right now? ›

Used car sales are down 16% so far this year compared with 2021, and new vehicle sales are down 19% so far this year compared with 2021.

Why are dealerships still around? ›

Aside from all of the back-end laws and costs, dealerships still exist to provide the customers a good customer service experience and build brand loyalty. Dealerships allow for an easier process when it comes to doing warranty and recall work, as well as routine maintenance and other repairs.

Are car dealerships making money? ›

Car Sales Tanked in 2020, But Dealerships Had Their Most Profitable Year Ever. On average, dealership profits rose nearly 50 percent in 2020—despite sales volume dropping by 15 percent.

Is it a good time to be a car salesman 2022? ›

About 23 percent of employees will look for a new job in 2022, according to a recent poll of American workers by ResumeBuilder.com.

How many hours does a typical car salesman work? ›

Most car sales representatives work full time, or an average of 40 hours a week. A car salesperson's schedule may not be set, however. For example, a car salesperson may work from 9 a.m. to 5 p.m. Monday through Friday one week and then work from 11 a.m. to 7 p.m. Tuesday through Saturday the next week.

Which dealership sells the most cars? ›

In 2020, Rightway Automotive Credit was the leading car dealership in the United States based on the number of vehicles sold. Michigan-based Rightway Automotive Credit sold over 12,900 used vehicles in 2020.

Will car prices drop in 2022? ›

Used car prices are already starting to drop as the market cools, having seemingly peaked in early 2022. On the other hand, new vehicle prices are unlikely to drop in 2022 due to persistent inflationary pressures. “There's still a lot of inflation bubbling up in the new vehicle supply chain.

What is the best time to buy a car in 2022? ›

While we've identified a few tips to help you get more attention from salespeople or to shop during the biggest sales the bottom line is this–there is no “right time” to buy a car. Any time of the year if you need a vehicle and you see a good price jump on it.

Will new car prices drop in 2023? ›

Experts don't anticipate the microchip crisis to ease until 2023, so prices likely won't drop significantly this year. Outgoing Volkswagen CEO Herbert Diess recently told reporters, “in 2022, we will not be able to build all the cars we could sell.” Thin supply means high prices through early 2023.

How do dealerships make money on financing? ›

Traditional means dealerships make money off of financing

What the dealer negotiates with lenders is the interest rate they pay, not what the end user, or car buyer, pays. This provides the dealership an opportunity to mark up the interest rate ultimately offered to the client and make money off of financing.

Will auto industry recover? ›

We currently expect auto sales growth to rebound in 2023, with a potential rate of expansion of 5% year-on-year, or higher.

What is the most profitable car company in the world? ›

Who makes the most money? Tesla ranked behind only Mercedes-Benz in per-unit profit in 2021. Mercedes-Benz was the most profitable car company last year, putting nearly $26 billion on the bottom line.

Where do car dealerships make the most money? ›

So where does the majority of a dealership's profit come from? It's not from car sales, at least not directly. It's from the service and parts department, which accounts for the other 49.6% of the dealership's gross profits, according to NADA.

How much profit does a car dealer make on a new car? ›

Average profit per new or used car

The National Automobile Dealers Association (NADA) reports that the average gross profit for a used car is $2,337. That same data set puts the average gross profit for new cars at $1,959.

How much do car dealership owners make? ›

As per the study, most automakers in India offer less than 5 per cent of the average fixed dealer margins, basically, it ranges from 2.9 to 7.49 per cent on Ex-showroom price across all categories. In India, MG Motors and Maruti Suzuki offers the highest average dealer margins at 5.22% and 5.07% respectively.

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