Chip shortage is affecting rental car orders: What it may mean for the industry
Could small car rental operations benefit?
News recently emerged through a report in Auto Rental News that U.S. car rental companies are beginning to feel the effects of a global shortage of semiconductors used in automobiles.
Several system licensees had an original equipment manufacturer cancel major orders. One major system licensee said that fleet orders, particularly in rental, would be the first to get cut.
OEM representatives have informed licensees to expect significant delays for certain vehicles, particularly for trucks and SUVs. An informal survey was conducted among rental operators with one licensee suggesting: “I feel like the OEMs aren’t sure right now. I’m expecting several months’ delay on vehicles I had scheduled to be built this month.”
A rental fleet supplier reiterated that they were scrambling for product, primarily on SUVs.
What’s causing this shortage?
The semiconductor chip market saw production problems intensify last year when the coronavirus pandemic disrupted supply chains. These semiconductors control smartphones and computers. They are critical for automobile production, as they control infotainment systems, engine emissions and collision avoidance systems. These semiconductors need 200 to 400 chips.
It wasn’t a major problem for the industry initially, mainly because new vehicle demand was slowed down for several months. With the demand drastically reduced, chip manufacturers focused on more profitable sectors, shifting away from chip production for cars and turning to consumer electronics. However, as auto manufacturing picked up, this chip shortage caught up to the industry.
How have manufacturers reacted?
-Ford closed its Louisville plant on Jan. 11, which makes the Ford Escape and Lincoln Corsair. They are expected to reopen in early February. They have also closed the German plant for one month, which makes the Ford Focus for that European market.
–Stellantis (former FCA) delayed restarting its plant in Mexico that makes the Jeep Compass and scheduled downtime for its Canadian plant that builds the Dodge Charger, Challenger and Chrysler 300.
-Toyota has scaled back production at its Texas plant that builds the Tundra.
-General Motors is slowing production at a South Korea plant.
-Volkswagen slowed operations at factories in China, Europe and North America.
Parts suppliers feeling effects too
The chip shortage comes at an inopportune time, as the industry’s new vehicle production is decreasing at a time when consumer demand is increasing.
“Now, just as production capacity is coming fully back online, we have a major crimp in the supply chain causing a production shortfall that’s continuing to drive up transaction prices for both consumers and fleet buyers,” said Karl Brauer, executive publisher at CarExpert.com. “Even more troubling is the long-term nature of this issue, as it appears to be a systemic problem that will linger for at least several months.”
How can rental operators proceed?
With OEMs canceling or delaying orders, there could be some fleet shortages in the rental sector. However smaller operators who don’t follow normal fleet cycles may be in a prime position to take advantage, as they’ll be well equipped to provide the vehicles customers need at the moment.
As car dealerships see their supply cut significantly, rental operations can benefit. With prices and demand going up, rental operators can access their inventory more efficiently than the big chains, with smaller fleets to oversee.
If dealerships or larger car rental businesses can’t meet the demands of consumers, smaller operators can, as they’ll have their fleets ready to go. Using your car rental software program, you can manage your fleet allocation and forecast demand for the coming months. Planning accordingly will not only help smaller operators through the next few months, but will build customer loyalty, as consumers look for alternatives to the larger rental chains.
With Bluebird’s extensive reservation module, smaller to medium sized operators can in fact meet the demand and ensure their fleet is being managed as efficiently as possible. Additionally, Bluebird offers an integration with CRX, allowing our customers to use their powerful booking engine. This allows RentWorks users to accept online reservations directly through their website or through CRX’s travel partner sites, such as Kayak and SkyScanner. Connecting this powerful booking engine to your car rental system will bring high conversions to your website in a very simple fashion. You can reach out to your Bluebird account manager to learn more or contact us here.
The effects can be significant on the industry, so be sure to check with your account manager on how you can navigate these next few months by using the features available in your car rental program.
Better software. Better support. Better value. For over thirty years, Bluebird Auto Rental Software has been supporting its many, many happy customers around the world. Our flagship product, RentWorks, provides all the tools you need to run every aspect of your car rental business or service loaner department from the front counter to the back office. Call us today toll-free at 800-304-5805, or contact us here. We will be happy to walk you through Bluebird’s full suite of car rental software.