For the first time since the 1970’s Arab Oil Crisis I’m seeing dealers add a Market Adjustment to their already inflated Sticker Price and Administrative Fee’s but this time it’s to all the cars on their lot.
So considering that a vehicle is a multi-year purchase and the Chip Shortage that is predicted to end in months, short of an emergency what kind of crazy born fool would pay thousands more for an Elantra than even the manufacturer thinks it’s worth?
I agree with you, but some people have an immediate need for a car. I don’t have that need–thank God–and apparently you don’t either, but some folks do need a car right now, and will have to pay an inflated price–whether they like it or not.
Also, let’s hope that the end to the chip shortage is only months away. I have read some estimates that it could take at least one year for that situation to be resolved.
And you know that how? Even if it does, there is a huge backlog of orders, I don’t see car inventories going back to where they were for a year, or more.
Therefore prices will remain high, and ‘market adjustments’ will be common. Supply is down, demand is up, no way around those facts.
It is extremely foolish of us to put ourselves at the mercy of hostile foreign companies for the manufacture of things we can’t do without.
Back when I sold cars for living (circa 2003), the Nissan dealership I started at slapped an ADP sticker on every single new car on the lot. Brand new NISMO 350Z? Market adjustment sticker, base model Sentra without A/C? Market adjustment sticker. The thinking was (per the GM) that customers were so uniformed/stupid that they wouldn’t question anything, and when you allowed them to negotiate out the ADP, they would feel like they had “won” even though they didn’t have be move off MRSP. It should be mentioned that there were also another 3 Nissan dealers in town and they didn’t partake in this foolishness. Shockingly, the ADP on everything program never once worked that I was aware of. The customers would ask about it, and it was next to impossible to justify, given that the customer could just drive 10 miles in any direction and go another Nissan dealership selling the same vehicles as us without markup, so I never bothered trying, and just negotiated off of MSRP.
I can see dealerships attempting to mark up limited production models, like the Ford GT , or the new Z06 Corvette, etc. But when you’re doing it to every mass market vehicle you can get your hands on, you deserve whatever happens to you. Lately on my facebook feed I get ads from local dealers touting “special” prices. When you click on the window sticker of any of these vehicles, the “special price” is usually $10k-$15k over MSRP. It’s a joke. Nobody should be buying a car right now unless it’s absolutely necessary.
Back in the '80s, when demand for Hondas really increased, every Honda dealer in NJ was slapping an ADP sticker on every car–and they stuck to those inflated prices. IIRC, this was also taking place in NY & PA. I worked with a guy who actually drove to RI to buy his Honda because there was a dealership in RI that didn’t engage in that ADP nonsense.
Why do you think that they are hostile? The problem is having enough employees during the pandemic. We aren’t the only place with problems. Remember too that the chip manufacturers need raw materials and if their suppliers are at low production levels, it ripples up the supply chain. Actually, they are so US-friendly, that many are setting up US factories, like the Taiwanese giant TMSC. It’s probably out of concern for the mainland Chinese increased overtures to subjugate Taiwan.
It’s nice to be able to choose when to buy a car. Normally we would have done it a year ago, but no point now. A friend was rear ended by a truck a couple months ago. She needed a new car that week. Luckily they had one in stock and the price was reasonable. When you “need” a car you need a car. If you just want one, that’s different.
as far as the mark-ups you just have to do your research. there are plenty of honest dealers that will still only charge MSRP. here is a list for the new C8 corvette. it has not changed much for the 2021 or 2022
That is an oxymoron…
When you are selling something, honest is telling the buyer a flaw you know about in the vehicle if asked or not tacking on a crap free after the deal is done. Not selling at MSRP doesn’t fall into dishonest, in my book. That S means “Suggested”
If one dealer can get more because demand is high and supply is low, great for the dealer. If other dealers are selling at MSRP, don’t buy from that one dealer. That is the way the market works. It isn’t honest or dishonest. It is up to the buyer to do their homework.
When I do searches for various new cars on autotrader, I’m now seeing lots more ‘call for price’ than I did even a month ago.
Pretty simple …
There was no fundamental change in the overall chip manufacturing capacity or technology, simply a change in demand for specific varieties.
When Covid hit, driving took a big hit so demand for automotive chips cratered and since people were now working from home, demand for computer chips surged and chip makers shifted their production accordingly.
There were other factors at play including a temporary surge in consumer’s cash, some temporary reduction in plant output due to absent workers but most quaranteens are over, people are going back to work, shopping, kids back to so that temporary demand shift from cars to computers is coming to an end.
With no significant lead times for reengineering the software or the production lines, the shift to automobile chips should be reasonably quick, although human nature to try to recoup lost profits may certainly delay immediate consumer price relief.
But that’s greed, not supply & demand.
And I also agree with “oldtimer”, that it’s the height of folly to be dependent no foreign supplies or to not have reserve capacity for any critical material but the fact is that chip forges only make a decent profit when they’re running at high volume and low cost so if you want domestic production and reserve capacity the Government will have to subsidize it.
How will that go over in Texas? 
This indicates that isn’t going to happen anytime soon:
How and When the Chip Shortage Will End, in 4 Charts - IEEE Spectrum
Key quote:
" At $39.5 billion, the auto industry makes up less than 9 percent of chip demand by revenue, according to market research firm IDC. That figure is set to increase by about 10 percent per year to 2025. However, the auto industry— which employs more than 10 million people globally— is something both consumers and politicians are acutely sensitive to, especially in the United States and Europe.
Chips for the automotive sector are made using processes intended to meet safety criteria that are different from those meant for other industries. But they are still fabricated on the same production lines as the analog ICs, power management chips, display drivers, microcontrollers, and sensors that go in everything else. “The common denominator is the process technology is 40 nanometers and older," says Mario Morales, vice president, enabling technologies and semiconductors at IDC.
This chip manufacturing technology was last cutting edge 15 years ago or earlier, lines producing chips at these old nodes represent a full 54 percent of installed capacity, according to IDC. Today these old nodes are typically used on 200-mm wafers of silicon. To reduce cost, the industry began moving to 300-mm wafers in 2000, but much of the old 200-mm infrastructure continued and even expanded.
Despite the auto industry’s desperation, there’s no great rush to build new 200-mm fabs. “The return on investment just isn’t there," says Morales. What’s more there are already many legacy-node plants in China that are not operating efficiently right now, but “at some point, they will," he says, further reducing the incentive to build new fabs. According to the chip manufacturing equipment industry association SEMI, the number of 200-mm fabs will go from 212 in 2020 to 222 in 2022, about half the expected increase of the more profitable 300-mm fabs."
Here’s another’s opinion:
“Some auto executives are estimating production will not return to pre-pandemic levels until 2023. And chipmakers have said it could take upwards of a year or two for chip production to meet current demand.”
So it looks like a year minimum before things get anywhere close to normal.
I guess I could of worded that better. what I was trying to say that if you do your research you don’t have to pay 10-20k over MSRP. there are dealers out there selling the same vehicle for MSRP.
When we buy vehicle we look for the best deal…I don’t care if there are added markups. What’s the bottom (discounted) price. I bought my 05 4runner from a dealer that was noted for having all these markups. Didn’t bother me. My final price was about more then $5,000 under MSRP. It’s the final price that matters.
The problem is in todays market - buying a vehicle under MSRP is very difficult. Inventory is low and dealers are going to get maximum profit. If you’re willing to pay for this, then go ahead. It’s worth waiting for this shortage to end if you can.
I did say Honest Dealer was an oxymoron… Like jumbo shrimp, advanced beginner, or honest politician…
Just that I don’t think adding ADP is dishonest…
Now, not telling you their dealership has the “lowest ADP in the area” when it doesn’t, or that used car you want was only driven by a little old man on Sundays when it was Mario Andretti’s car… Well THAT would be right up the dishonest dealer’s alley!
I really liked our Buick dealer in town. Owner went to our church and a very decent guy. Got $150 over cost through a deal with the credit union etc. Then I was in the waiting room waiting for my car and the sales folks were having their weekly/daily/I dunno meeting. Due to open office design, I could hear every word as they reported on their prospects, customers, etc. I don’t know what to compare it to, maybe an AAMCO meeting but essentially the customers were chumps waiting to be taken advantage of. Been out of business for years and I still like the owner but man those sales people would not be welcome in my house dating my daughter.
As far as the chips go, like commented before, just stupid JIT inventory management. On a 50 cent critical part, you do not treat that as a JIT item. You have a reasonable stock on hand to meet production requirements. Now I understand there are many chips used, and they are foreign produced, but all the more reason to protect your supply and profitability. A 50 cent critical part is not the same as having 3 months worth of supply of $5000 engines. Just stupid. IMHO anyway. Even at home I have stock of low cost critical items.
Good article but Prepandemic, auto and chip makers had no difficulty meeting the demand for new vehicles and nothing has happened in the meantime to diminish their capacity to make automotive chips at Prepandemic levels. So if there’s a current shortage of cars on the lots, why?
First, even if you you’ve made it before and have all the tools and supplies on hand, production doesn’t happen immediately, it take awhile to fill the supply chain to the consumer.
But in this case, we’re looking at a Demand side “whipsaw” the result of loose cash, deferred gratification and a certain amount of panic buying. “I’ve got money burning a hole in my pocket, been looking at that new SUV for 6 months and I want it now and that old if I don’t get it now I may not be able to get it!”
And haven’t we all seen this kind of Market psychology before, especially during the last year?
Toilet paper shortage? Southern gasoline shortage? Real estate skyrocketing?
This kind of “shortage” hype has been around forever, Cabbage Patch dolls, Beanie Babies, convertible cars, new Apple products and Jordan Nikes that you’d think we’d have run out of suckers long ago yet it still seems to be an effective way to shift our money to someone else’s pocket!
So I’ve decided to join the other team.
“Due to the pandemic, California wildfires, Midwestern droughts, Southern floods, EPA restrictions and the post pandemic return to work it’s expected that yellow #2 lead pencils will be in very short supply.but I’m prepared to offer you a special deal, 2 for $1 plus $20 s&h.
Limited supply so get your’s early, cash only”. 
You may be right, but bottom line is this: I’ll bet a box of donuts that it’ll be 12+ months before things calm down for new car buyers. The pipeline is almost empty, and it’s not filling up. Dealer lots are emptier now than they were 3 months ago.
I think it is going to stay that way. I think they are going to keep a few models on the lot for people to test, and you will order what you want and then wait till it comes in. like they have been doing with corvettes for years. dealers wont have to lay out a bunch of money for vehicles sitting on there lots. I might be wrong but just my thoughts.