The semiconductor chip shortage has upended the auto industry. The sky-high demand for new and used cars are forcing OEMs, dealerships, fleets, rental companies, and remarketing companies, such as Vroom and Carvana, to rethink their supply chain strategies. As a top vehicle logistics provider that works with all sectors within the auto industry, RPM is acutely aware of the biggest challenges affecting each sector as the chip crisis continues.
The top challenges for…
The semiconductor chip shortage has created increasing volatility in production and shipping patterns for automotive OEMs. The chip shortage forced many automakers to stop production of not only specific models but also entire lines of vehicles, leaving factories and their workforce vulnerable. In addition, the shortage of inventory has affected the carrier network, causing many carrier companies to readjust and reprioritize their businesses. This disruption will inevitably lead to a lack of capacity when the shortage of chips slowly subsides and when the production lines are ready to be revamped. This is where RPM can make a huge difference. As a non-asset-based provider, RPM’s flexibility and its ability to scale are crucial when capacity tightens.
Currently, the lack of new-car inventory has meant higher profit margins for dealerships. Selling new vehicles close to or over MSRP is not uncommon these days. And neither is the incredible growth of used car margins. But what is uncommon is seeing how far buyers will go for the car they want. Literally. Car buyers are searching coast to coast for the cars they want, rather than relying on local dealerships. The growth of online purchases, compounded with the lack of inventory, has led to this new consumer behavior. Unfortunately, not all dealerships are poised to make these moves possible, whether it’s a lack in their digital offering or in their current network of carriers. RPM is uniquely positioned to solve both challenges. In addition to moving inventory with tight timelines amidst tight capacity, RPM recently developed a QBP (Quoting Booking Payment) tool/service that lives on dealer websites. This consumer-facing tool allows online purchasers the ease of finding the vehicle they so desire and having it shipped to them. Another perk of this QBP tool is that staff members do not have to interact with the tool (it’s automated), saving time and resources.
While OEMs and dealerships have been feeling the pressures of lacking inventory, the fleet sector of the automotive industry has also felt immense pressure. The inability to source new in-fleeting units from OEMs, combined with customers choosing not to re-up fleets, has led to less remarketing and value-added services revenue (license plate installation, vehicle ID stickers, diagnostic and vehicle telemetry, interior preparations, such as key tagging, clock programming, plastic removal, and branding placement) squeezing profits. Unavailability of vehicles is leading to customers retaining aging fleets and, therefore, not driving the churn that fleet companies thrive on for revenue. When de-fleeting and new units are pressed into service, the speed and flexibility of RPM to help get units to the most profitable auctions or remarketing streams allow fleet customers to maximize ROI in this increasing hot used vehicle market.
With lessees extending leases, available units have shrunk and most inventory being turned in is bought by the turn-in dealer. The reduced transportation needs are creating an impending concern surrounding source capacity, as it quickly migrates elsewhere. “A month ago (in May 2021), the relatively high price of used cars was pushing many buyers toward new cars, but now that a global semiconductor chip shortage has prompted many automakers to slow or pause production, new cars are scarcer. Now even rental car companies—many of which sold off vehicles during the nadir of the pandemic last year when car rentals and travel, in general, plummeted—are buying used cars just to bring their fleets back in line with rising demand. Although used car prices are rising faster than new car prices, experts say that the spike is a double-edged sword. Dealers are trying to snap up as many used cars as they can to satisfy customer demand. And that means you can get top dollar if you’re looking to sell or trade in.” (ConsumerReports.com.) Ultimately, less remarketing revenue is causing sporadic needs for the rental and fleet market, and RPM, with its flexible model, is well equipped to handle.
As OEMs prioritize their high-margin premium models, the rental market cannot refleet fast enough. This constraint puts increasing pressure on rental companies to maintain a limited number of units. The result has led to skyrocketing prices and a need to dynamically shift units to hot markets. But buying used cars to refleet presents unique vehicle-sourcing needs. Once again, RPM can alleviate these needs with our network. Our flexibility to source on-demand capacity to meet the volatile shipping needs of today’s rental networks allows us to shift inventory around the country in a moment’s notice, ensuring visibility to JIT unit delivery for special events and quick turnaround to reallocate those units to the next special event or hot vacation destination.
RPM understands the gaps and pain points affecting all sectors within the vehicle space. RPM provides capacity for our customers’ transportation needs, regardless of mode, and alleviates supply chain pressures for suppliers, OEMs, dealers, retailers, and auctions. The end-to-end experience in the automotive space gives RPM a unique understanding of industry needs and consumer behavior.
If you’re a vehicle shipper looking to source capacity in this tight market, RPM is here to help. Visit RPMmoves.com to learn more.