In the Know: Hard to find cars costing 40% more during shortage as dealers look to expand
Tons of space but far fewer cars.
That's the new normal at auto dealerships in Southwest Florida. But that doesn't mean dealers aren't busy.
The lots may be emptier than the past thanks to supply line challenges, but sellers are offering top dollar for trade-ins and being creative with digital orders. And forward-thinking dealers are adding more space for more cars to come.
"Our plans are coming along for our new location, which will be located just north of our current location," said Dealer Principal Todd Rosenthal of Naples Motorsports,1250 Airport-Pulling Road S., with designs emerging of a slated four-level structure. "We also recently purchased another location in Sarasota, which will end up being similar to what we have established in the Naples market."
Along Luxury Automobile Alley, Germain Motor is wrapping up its new Naples BMW venue 2,000 feet from Rosenthal in January and moving its Lexus outfit to greener pastures on nine undeveloped acres off Immokalee Road, near I-75. No start date has been finalized for the latter, said contractor Waltbillig & Hood's Kayla Chand, who with her colleagues has faced obstacles, slightly delaying the former.
"Filling jobs has been challenging. (There) remains a shortage in our industry; the supply line remains unpredictable and erratic, and the availability of material is often up in the air," Chand told me Thursday, but there's progress. "We have just finished two dealership projects. We finished the Jaguar Land Rover Naples renovation on Tamiami Trail and the Mercedes Benz of Naples interior renovation on Airport-Pulling Road."
Morgan Auto Group, which purchased O'Brien Auto Park of Fort Myers, consisting of Subaru, Mazda and Hyundai-Genesis in December to go with its Mazda, Subaru and Chrysler Dodge Jeep in Naples, has kept adding to its portfolio in 2021 including eight more spots last month in Tampa Bay.
And LMP Automotive Holdings, which acquired local Fuccillo Kia dealerships last year, has been stockpiling, too, with more expected by the holidays including the Peninsula's Alan Jay Automotive Network that has fronts in Clewiston, Sebring and other locales.
"We intend to continue expanding aggressively in this region as we are seeing a record amount of interest," said Richard Aldahan, LMP’s chief operating officer, lured by the "fastest growing regions (in) the attractive Florida market."
"Our volume of cars is down, but profitability is increasing," Rosenthal told me. "2020 was our company's best year in history. At the end of August, we surpassed our numbers for 2020."
Much like what's happening with housing, the prices are soaring for the new and used.
"Across the board pre-owned values have gone up 20-40% more than what we were paying a year ago. We've been able to in some cases to give people more back for the cars than what we sold them for years ago," Rosenthal said. "Transportation is an issue whether it's a new car coming or a boat or a pre-owned car we are purchasing from out of state. We struggle with the same issues that all businesses are running into."
What's the biggest?
"Not knowing what the new normal will be," said Rosenthal, who like others also finds it hard to fill jobs. "We are very lucky that our core team has been with us for a long time, but as we add new people it's been a struggle."
What's Plan B?
But while he's not training incoming workers, he is having to coach consumers.
"We deal with it on a daily basis. We have to educate our customers that the pipeline of cars and parts has slowed a lot. One vehicle we sell is a 1965 Cobra Replica. We were getting five to six a month, and now we are lucky to get two a month. We've had cars held back for missing seat belts or other small items that hold a sale up," Rosenthal said of the six-figure deals. "New inventory is very slow coming to us."
That, however, has sparked a side of the business in the U.S. that's much more common in Europe and the rest of the world.
If you can't enjoy the immediate gratification of finding what you want and instead have to wait around anyway until it magically appears on a lot, why not Plan B?
Germain has been touting the build-to-order concept including at a recent gathering of industry leaders held by trade publication Wards, which has been around since the Model-T began rolling off the assembly line.
“We make sure people know there is an ordering process,” said Shawn Kniffin, Germain’s marketing and technology director, who noted the new emphasis in digital retailing that has surged during the coronavirus era. “Some of these changes won’t change back. Why should they?”
Today’s process is more efficient than before, because of digitalization, starting with the submitted order going immediately to the auto factory, according to Wards.
For Germain, it can take a few weeks and up to six months, but the company says there's flexibility. For example, it notes most manufacturers allow those with expiring leases to extend them as long as a vehicle has been ordered.
Patiently waiting for $100,000 car
And patience is becoming a virtue for at least some Americans.
An Urban Science-Harris Poll summer survey found that 30% of consumers are fine with waiting two to three months if they couldn't have the hot wheels they preferred that day.
A few of Rosenthal's buyers are hanging in there longer. Much longer, as he's finding with Karma Automotive, a California manufacturer of $100,000 electric cars.
"We haven't had a new car in almost eight months, and we are not sure when the new cars will arrive. That's extremely difficult as we grow the brand. We have cars presold that we cannot get right now," said Rosenthal, noting hurdles also with Alfa Romeo's Stelvio sports utility and Guilia sedan. "Very special (in) the Alfa Romeo lineup, those models have been extremely difficult for us to get. (The) demand is really strong."
But that's not hurting the bottom line when it comes to his machines topping 180 mph.
"Last year, we were named the top Lotus dealer in the world. By the first week of July, we exceeded our sales for all of 2020. Lotus announced a new model coming in 2022 called the Emira. We currently have well over 100 pre-sold cars with deposits," said Rosenthal, who has a pre-production version scheduled to arrive Nov. 27 for show.
He has has other treats racing around the bend from Rimac Automobili, a Croatian car company that this month merged with century-old European brand, Bugatti.
"I was able to travel to Croatia this year to test drive the new model coming, which is an all electric Hypercar, which sets a new standard in performance. It's rated at 1,914 horsepower. To put that in perspective, the highest horsepower Ferrari produces now has less than half that horsepower. We already have our first year's allocation sold out, and we expect our first car here at the dealership in March," he said.
Paying 40% more for cars
LMP also is having success, based on third quarter results presented Monday by CEO Sam Tawfik and reflected by the Seeking Alpha stock tracker that showed higher revenue and net income than a year ago.
“During the quarter, consumer demand continued to outpace supply," Tawfik said. "New vehicle inventory remains at historically low levels and predicted to remain the same into the near future. New vehicle sales are constrained by reduced production volume and low inventory levels. We expect this pent-up demand to continue to support sales for the foreseeable future."
And that is the unknown. When will this ease with the microchip shortage that's a major factor? Some industry predictions say that may begin happening by early next year, according to Wards. For example, Toyota this month upped its full year forecast in anticipation of improvement.
But Tawfik said it's "hard to predict.
"As far as the OEMs, (the manufacturers) haven't been given any indications on steady supply. It's sporadic," Tawfik said of the slim pickings that have positives for him. "We see the steady, but maybe choppy (supply) on a monthly basis, but on a quarterly, slash, semi-annual basis, just the demand outstripping the supply for the foreseeable future, which would entail same if not better financial results for the foreseeable future."
Not better though for shoppers, no matter what they're buying.
Analytics firm iSeeCars studied August purchases and found used car prices up 32% from a year ago in Collier and Lee counties, an average of $6,399. At the top: the Kia Forte at 42.5%.
Nationally, the average transaction price for a new car last month was $45,630 compared to $39,891 in October 2020, according to Edmunds.
Robert Handfield, executive director of North Carolina State University's Supply Chain Resource Cooperative, explained Thursday how we got in this mess in the first place.
“The factors that are really contributing here is a combination of different things," said Handfield, professor of supply chain management in NC State’s Poole College of Management. "First of all, it’s the COVID-19 cases that have stopped production in manufacturing and imports."
But it doesn't end there. Far from it.
Add in "a lot of energy disruptions especially in terms of manufacturing hubs around the world, labor shortages here in the U.S., lack of capital infrastructure investment in the semiconductor industry, and some huge bottlenecks in terms of transportation resources, a lack of containers, ships, and trucks," Handfield said. "And when you put surges in consumer demand on top of that, it’s a really bad situation.”
Based at the Naples Daily News, Columnist Phil Fernandez (firstname.lastname@example.org) writes In the Know as part of the USA TODAY NETWORK. Support Democracy and subscribe to a newspaper.