Semiconductor issue ‘not done worst yet’, say fleet experts
Shortages of semiconductors and other components are likely to get worse not better over the coming months, impacting the fleet sector and used car and van markets further.
While the challenges being posed by the issue have been much highlighted in recent weeks, the latest ‘Five Minute Briefing’ from the Vehicle Remarketing Association (VRA) indicates that the problems look likely to worsen.
Speaking last month, the Association of Fleet Professionals (AFP) warned operators to start planning ahead for potential disruption to new vehicle supplies while FleetCheck reported last week that operators are facing “worst-ever” vehicle delays – and delivery times of up to a year are becoming common.
The new report from the VRA indicates that the problems could last for some time – certainly well into the second half of 2021 and possibly into 2022.
The briefing, which comprises short comments from six experts from the industry body’s board, includes a warning on new vehicle supplies from Derren Martin, head of valuations at Cap HPI.
Martin said: “For the remainder of quarter two, manufacturers may well have stock into which they can switch customers, which will in turn generate part-exchanges and fleet returns for the used market. From late June and into July however, stock levels will have dwindled and the component shortage could well be impacting supply more acutely, again dependent on the brand.”
Marcus Blakemore, director, MJB Automotive Solutions, agreed that the supply situation “does look quite grim” and said the fleet sector is being especially hard-hit.
“Manufacturers are continuing to focus on retail channels and there will be limited car supply into fleets, with short-term rental especially being affected, possibly continuing into 2022. CAFE regulations may also force manufacturers to sit on new petrol and diesel vehicles in Q4 of this year, delaying deliveries still further. All of this has a direct knock-on into the used sector, with reduced numbers of vehicles being recycled by fleets into the market. If anything, new van supply is even more exhausted, so used LCV values will continue to rise as demand outstrips supply.”
Rupert Pontin, VRA deputy chair and director of insight at Cazana, also highlighted the potential subsequent supply challenges for the used car sector, including the restricted supply of late plate used stock from manufacturer employee car schemes and demonstrator programmes.
He continued: “The lack of new cars will also affect the fleet market which may struggle to replace company cars, therefore altering the flow of 3-4 year-old ex-contract hire and lease vehicles into the market. As such, those cars that do come back may have a higher mileage and be in poorer condition than expected.”
And Philip Nothard, VRA chair and insight and strategy director at Cox Automotive, reiterated his concerns over new vehicle supplies. Data published by Cox yesterday revealed a knock-on effect on the already strained used car market due to the supply challenges – and in the VRA report, Nothard said dealerships “could well be hit with a crisis even worse than coronavirus itself”.
Cap HPI’s Derren Martin summed up: “The semiconductor issue could well not have done its worst yet and these supply issues are likely to keep [used vehicle] prices strong for a good while yet.”