With Fewer Chips, Automakers Are Prioritizing High-Markup Vehicles, Offering Fewer Deals
When automakers were forced to make fewer vehicles with the chips they had available, Business Insider reports that "Naturally, they chose to prioritize those models that had the highest demand and made them the most money. "At the same time, the reduction in the supply from all brands meant that dealers could make a sale without the traditional haggling over the vehicle's sticker price. The result has been a boon for automakers." Mark Wakefield, a consultant with AlixPartners in Detroit, told Bloomberg that US car companies were now making $3,000 more per car than average, as well as up to $10,000 more on certain pickups and SUVs. One dealer who sells upgraded pickups in Ohio told Morning Brew that his dealership recently closed a deal in 52 minutes that would have taken four hours before the chip shortage. "The surprising part is the average selling price on those trucks is close to $100,000, and the consumer demand has still been sky-high," the dealer said. Jim Farley, Ford's CEO, said in June that this new pricing power was "breathtaking" and indicated that the company wouldn't be returning to the days of guessing over how many cars it should produce and then marking them down until they sell. Mary Barra, GM's CEO, has also said that customer orders will play a larger role in her company's production strategy. Kevin Tynan, an auto analyst for Bloomberg, told Insider earlier this year that the industry has been trying to get off the incentives and discounting model for decades. "They don't totally hate this," he said, referring to the shortages. "Moving forward you're probably going to get an industry more like what we're seeing now, where supply is a little bit more managed, and incentives are not as aggressive as they've been." The article summarizes the prediction of the Bloomberg auto analyst: "Good news for automakers and investors, but that also means consumers can expect to continue to see fewer options, higher prices, and a tighter used-vehicle market going forward."
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