Setting vehicle delivery expectations for MY 2021/22

Halfway into 2021, the auto manufacturers are still scheduling plant shutdowns due to the semiconductor chip shortage. Seeing this supply chain nightmare extend this far into the year, we feel it necessary to make clear what we believe vehicle production and delivery will look like going into both the 2022 model and calendar years.

Auto manufacturers update

The OEMs continue to publish promising stats on Q2 vehicle sales and earnings. But as time goes on, their sellable inventories are slimming. Based on a report published in May by AutoForecast Solutions, here’s an estimated look at the hit the Detroit 3 have taken thus far:

Less affected manufacturers include Toyota, Hyundai/Kia, BMW, and Tesla.

The resolutions require space and time

The good news is that the OEM contacts at ARI and Auto Truck are beginning to hear confirmations that the chips are arriving. A number of North American factories are anticipating production resuming steadily in late June and running into July.

More good news is that nearly all manufacturers are shifting priorities to the vehicles with the highest demand, specifically pickups and full-sized SUVs. Ford and the other OEMs have been building vehicles as far as they can without the chips so they are ready to go when the chips finally arrive.

Also during the downtime, the manufacturers have identified and implemented efficiencies in their production processes.

However, while fleets may be hearing the news that factories could be shipping out vehicles as early as July, this doesn’t mean you’ll be receiving your ordered vehicles in August. Here’s a rundown of the new obstacles those vehicles will face:

  • With chip quantities per vehicle ranging from 100 to 1,000, installers at each factory need time to work through the backlog of thousands of built vehicles that are awaiting the chips.
  • Once the chips are installed, the vehicles need to go through testing. Again, the sheer volume will require some time.
  • After testing is completed, the vehicles go into the OEM transportation lanes. With many factories across the U.S. ramping up production at the same time, there’s only so many autorack railcars and auto transport trucks available to move the vehicles to their next destination. The shortage of qualified truck drivers and HOS regulations will hamper the delivery process even further.

Vehicles need upfitting?

  • If your vocational trucks and equipment are heading to an upfitter before coming your way, the issues of space and time now shift to the upfitter. Their holding lots and shop floors can only hold so many vehicles, and there are only so many labor hours available in a day. Also limited is the volume of all the other parts the upfitters can inventory during a given timespan.
  • Once the upfit is complete, the fleet vehicles will go back in line in the already crowded transportation lanes.

Here’s one more challenge we saw beginning on a small scale back in January that is now impacting upwards of 50 percent of vehicles left in the pipeline: With the summer months being traditionally a time of transition to the new model year, we’re seeing manufacturers cutting off production of MY 2021 orders. If this impacts your fleet, you’ll need to restart the order process all over again, potentially analyzing new specs and feature packages, and reevaluating your budget.

What’s more, we’re starting to see estimated lead times for MY2022 at 30-40+ weeks, as opposed to the standard 14-16 weeks.

Setting expectations

Based on ARI’s and Auto Truck’s data relative to known orders in our systems, OEM status, and standard supply chain output and timeframes, the truth is there’s a chance you may not see your MY2021 vehicles at all or your MY2022 vehicles delivered before the end of the year. In fact, we may still be having the last of these conversations this time next year.

You have our support

All year, our ARI and Auto Truck teams have been preparing to help you face these challenges.

  • Monitoring OEM communications more closely than ever and more than tripling your access to the information we learn.
  • Reinforcing our integrated vehicle supply chain teams across ARI and Auto Truck so that everyone has a big picture perspective of your orders and timeframes.
  • Understanding your most urgent vehicle needs, identifying applicable vehicles, and then pinpointing them for you; avoiding dealer stock purchases whenever possible now that prices have escalated above MSRP and inventory levels are at a record low.
  • Revaluating your replacement cycling and establishing a plan to control operating costs for vehicles with extended lifecycles.
  • Providing outstanding results for fleets that are in the position to take advantage of the record high resale values for excess vehicles. (We expect this bright side of the vehicle shortage to continue for some time.)

In the grand scheme of things, this vehicle supply chain situation may continue to hold your fleet, and thereby your entire organization, in a precarious position. Do not hesitate to contact us for help.

Stay in the know with ongoing communications via the ARI Fleet Industry Updates and Updates & Projections webpages, as well as The Morning Brake e-newsletter and MOTIVE podcast.