GALESBURG — At Yemm Auto Group, this is an unusual year. The dealership typically serves Galesburg and the surrounding area, but Sales Manager Justin Wright says their clientele has come from farther out.
In a market with fewer available new cars, Wright says one customer drove up all the way from Oklahoma, to pre-order a car that was on its way to the dealer.
The reason this man had made the lengthy trip, he says, was because all of the dealers where that man lived were asking for exorbitant prices for that model, asking the buyer for thousands more dollars than were originally agreed upon for the car.
The second quarter of the year — April-June — has been marked by hot weather and an equally sizzling auto market, although some local car dealers say that market appears to be stabilizing. For others like Wright, it is simply the new normal.
Managers at Galesburg Nissan and Galesburg Toyota both say that demand for new and used cars have been high this year, in part due to increased consumer demand coming out of last year’s lockdowns.
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This has been complicated further by a shortage in semiconductor chips essential to the production of new automobiles, leading to a lower supply of new cars that has in turn also led to shortages in the used market.
The chip shortage has impacted more than cars. The shortage has been in effect since last summer, delaying the release of products such as the iPhone 12 and shortages of others like the Playstation 5.
According to a USA Today report, the shortage for a time led to factories shutting down temporarily. When a grounded container ship blocked the Suez Canal for nearly a week, it further choked off supply of chips headed to Asia and Europe.
These shockwaves and others have caused longterm logistical problems at a time when demand for high tech devices remains high.
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At Galesburg Nissan, owner Jeff Klinck has seen it firsthand over the past several months. Despite that, demand is high from a public seeking cars on their way out of the lockdowns and quarantines of last year.
The last three months have all been record months at Galesburg Nissan, Klinck says. In June, Galesburg Nissan sold 43 new cars, their best May ever. In June, they started the month with only seven new cars on the lot, but still sold 30 in the month. July was a similar story, with 28 new cars sold.
Comparatively, the average for the dealership is 25 new car sales a month.
Typically, the store prefers to stock close to 100 new vehicles on their lots at a time, but demand has been too high, and supply to low, for that to be feasible. Nissan also delayed the launch of a new model, Klinck says, in response to the chip shortages.
The high demand has been true at Galesburg Toyota as well.
Wright says the chip shortage is just one part of a greater logistical mixup in the auto industry. When asked about when new supply will become stable again, he says they have not heard clear answers. The result has been a market bereft with price gouging.
“If you look around, outside of Galesburg and maybe even in Galesburg, there is price gouging,” he said, noting that dealers out of town would offer prices above the manufacture suggested price for their new cars.
Wright says Yemm has avoided doing so in order to sell the cars locally.
In response to the supply issues, they have shifted a larger amount of their business into the used space, using creative methods that they would not detail in order to keep their lot stocked with “Certified Pre-Owned” vehicles. The used space has seen high demand as well, however.
The rising price of used vehicles have also led to rising wholesale and auction prices for used vehicles, and many people choosing to sell their own car instead of doing a trade-in. Rental companies that used to sell cars to dealerships are holding onto theirs right now as well, dealerships told The Register-Mail.
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The certified pre-owned designation allows buyers a like-new experience without the need to actually purchase a new car.
“We are trying to deliver a near-new product with near-new warranty at no additional charge because we just can’t get new cars,” Wright said.
At Galesburg Nissan, General Manager Sam Linn says used sales have been immense, both due to the waning of the pandemic and the value of the used market.
“Now is the best time to trade in your car because it’s never going to be worth more than it is now,” he said.
He says on average, used car sales are up 30-40%. He says the dealership is stocking as many used cars as they can as well, getting many from auctions. He says they have done a good job meeting demand, in part due to a change in leadership to Kunes Automotive Group in May that has brought a bigger focus on used car sales.
The Nissan dealership says that they are receiving lots of local trade-ins with the strong used market. Still, some of their other sources for used vehicles, like lease turn-ins, are no longer available.
The Toyota and Nissan dealerships who spoke to The Register-Mail say that supply should become more stable throughout the course of August.
“I have 100 Nissans inbound right now from the factory,” Klinck said.
Nissan told their Galesburg dealership that they would be at their lowest level of supply in late July and early August. Within the next 30-40 days, they expect to start receiving vehicles at an increase rate.
The 100 cars Klinck says they are expecting to receive soon are three to four times as many as they have received in the last couple of months.
Linn also says that the Toyota dealership’s new vehicle supply should be leveling out in about one month.
Wright disagreed with this assertion however. He believes that many manufacturers and dealerships want to return to normal, but whether that normal will be back any time soon, he is unsure.
“I think the dealerships waiting for things to (return to) normal are already behind the curve,” he said.
Instead, he says they are trying to anticipate the new habits and needs wrought by the pandemic. As one example, he mentioned someone who had sold their car as they now worked from home.
One thing he said will not change, at least in the United States, is the need for new automobiles as cars break down, people get drivers licenses and families grow.
“The strong companies right now are finding out ways to best serve their customers,” Wright said. “and the ones that aren’t are getting left behind.”
