New vehicle shortages expected to continue well into 2023

When Dan Shire ordered a new hybrid Toyota vehicle from a Toronto car dealership in March, he was told it would be delivered in six months.

Nine months later, Shire still doesn’t have a car. In fact, the dealership revised the estimated delivery date to March 2024.

“I understand a reasonable waiting period but two years seems extreme,” said the 66-year-old Pickering resident. “Luckily our old Camry is well maintained and runs well, but it’s on borrowed time.”

Global vehicle shortages will likely continue well into 2023 and Canadians on the hunt for a new car should expect ongoing delays and long wait times, industry experts say.

David Adams, president of Global Automakers of Canada, said a global shortage of microchips, a key component of vehicles, is one of the main reasons behind the limited inventory.

The tiny semiconductor chips act as microcontrollers, operating everything from airbags to remotes on a key fob. “Your average car has hundreds of microchips,” Adams said.

For that reason car shortages “won’t be resolved, probably not even through next year,” Adams said. “We’re going to see continued limited supply and even if it improves slightly, supply won’t be as robust as it was in the past.”

At the start of the COVID-19 pandemic in 2020, the auto industry hit the brakes on production as people were forced indoors. Meanwhile, chip suppliers began selling to electronics manufacturers as demand for cellphones, TVs and computers surged.

But the auto industry rebounded faster than anticipated, as cooped-up consumers, eager to get out of the house while avoiding public transit or shared taxis, started buying cars again.

“Production allocation went from producing chips for vehicles to producing chips for other electronic devices that were also in high demand,” Adams said. “When the demand for vehicles came back faster than expected there wasn’t the production capacity to make more chips.”

“There’s just more demand than there is supply right now,” he added.

Low supply and high demand is causing new car prices to surge, said Baris Akyurek, director of analytics with AutoTrader.ca.

“The average price of a new car is now $58,478 which is a 17.2 per cent increase compared to November 2021,” Akyurek said. “When we look at the trends, prices have also been going up on a month-over-month basis for over a year and a half.”

While Akyurek expects prices to soften in the future, “we do not expect the prices to go back to pre-COVID levels anytime soon.”

Shaf Karim, a salesperson at Toronto Kia car dealership on Danforth Avenue, said wait times could be more than a year for some cars.

“We’re still suffering from long wait times, it’s almost a year for some of our vehicles and if you’re looking at electric cars it might be a lot longer than that,” Karim said.

The ongoing car shortage is increasingly putting dealerships in the driver’s seat.

Shari Prymak, senior consultant at Car Help Canada, a non-profit organization that helps consumers navigate vehicle purchases, said many dealerships are “no longer negotiating with customers, they more or less have a take it or leave it attitude when it comes to pricing.”

In recent months, Prymak has heard a flood of complaints from buyers saying that dealers are inflating prices.

He said many dealerships are now charging a “market adjustment fee”— a price increase dealerships add on to the manufacturer-suggested retail price (MSRP) of a vehicle to account for low supply and high demand.

“This sort of behaviour was rare before the pandemic, almost unheard of, because there wasn’t a shortage,” Prymak said.

“In many cases, cars are overinflated in price, well above what the consumer should be paying. That can take the form of a market adjustment fee. Sometimes the dealership forces the customer to pay for expensive add-ons such as such as accessories and protection plans,” he said. “These products make a lot of profit and many dealerships are forcing customers to pay for them as part of the sale.”

Prymak advises Ontario consumers who encounter price gouging to raise complaints to the Ontario Motor Vehicle Industry Council, the regulator of motor vehicle sales.

“Dealerships are expected to follow a certain code of ethics and professionalism and it’s important that regulators continue to enforce that,” Prymak said.

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