Markets Work, however Untangling International Provide Chains Takes Time


Now there are higher prices for basic materials like steel and aluminum. There are suppliers who are forced to raise wages sharply in order to keep the assembly lines running. There are semiconductor manufacturers who are too thin to provide enough computer chips to make as many cars as consumers want to buy. There was even a shortage of resin needed in a car’s plastics caused by the Texas winter storms that year. In addition, the transport capacities for materials imported from overseas are blocked.

“It’s almost like having a patient battling cancer, heart disease and diabetes at the same time,” said Burris. The power that automakers normally have to deter suppliers from hike prices is collapsing, he said, amid the urgency to source supplies.

And as automakers cut production, there has been an unusual dynamic on the retail side of the market.

Automakers’ inability to produce at full speed, combined with strong consumer demand, shows itself in both obvious (prices are higher than usual) and less obvious ways, said Ivan Drury, senior manager of insights at Edmunds, one Publisher of information on the automotive industry. In the past, the “manufacturer’s suggested retail price” was generally a mere suggestion, with dealers negotiating actual sales prices of $ 2,000 to $ 3,000 below that level for an average car. Now, new cars tend to be sold at or just slightly below the suggested retail price, he said.

And traders use other techniques that limit sales. With inventory low, buyers looking for a high-demand car may need to commit to buying it before it arrives in the parking lot unseen. Some dealers, he said, will refuse to sell to anyone outside of the dealer’s territory to ensure that the buyer is generating continuous service revenue.

Things are even wilder on the used car market, where the slump of the last 16 months has led to a sharp shortage and sharp price increases for the rental car industry, among other things. Used cars and trucks were a major contributor to overall consumer price inflation in April and May.

Mr. Drury doesn’t expect that to change anytime soon. According to Edmund’s data, the average trade-in value of a car still rose another 2.9 percent in the first three weeks of June, after rising 21 percent in April and May combined.