SHORTAGES of semi-conductors leading to vehicle production delays and the ‘de-contenting’ of electronic equipment, as well as logistics issues, are leaving brokers short of cars and with unhappy customers.
Customers are venting their anger and dissatisfaction towards the broker, rather than the OEM, despite media reports of microprocessor shortages and the impacts on production, according to Leasing Broker Federation members.
Brokers said they are experiencing supply and lead-time issues although it does vary from OEM to OEM. One broker reported that a prestige brand recently cancelled up to 100 orders due to be built this year and decided to close 2021/22 model year production on two models altogether.
They will re-start with the next model year production but customers would have to re-order at new pricing levels and suffer renewed lead times.
Other manufacturers are “de-contenting” models due to shortages of microprocessors. Some also appear to have logistics issues.
On the other hand there are other manufacturers who do not seem to be affected to the same degree and stock is available.
Martin Brown, Chair at Fleet Alliance, said: “I think we are all affected now, and yes we are offering variations in spec for some customers.  It’s also worth pointing out that some manufacturers are worse hit than others – Tesla and Polestar being two OEMs who still have stock, as do others from Japan and Korea.
“It’s definitely challenging and not something that will disappear overnight. All we can do is work with clients to manage lead time expectations, and highlight the OEMS who have cars more readily available.”
Another premium brand has reportedly largely pulled out of pushing broker volumes having been a big volume player previously.
Clearly manufacturers have a duty to their franchisees to ensure that their direct demands are met and their SME/retail customers represent the channels that are not just the greatest profitability for them but also for their own networks – so it makes commercial sense to support their retailers and prioritise supply to their direct customers.
One broker said: “We have seen reductions to support levels from some OEMs. Where discount reduction is being applied then it is equally profitable for dealers to supply the broker channel as well as retail and our customers are willing to pay higher rentals – whilst it is possible that OEMs are prioritising loyal dealer retail/SME customers they cannot ignore the other volume channels.
“It is evident though that the rental operators are suffering as this is the highest cost channel in the market and anecdotally it appears they are being forced to hang onto their vehicles longer.”
However, some brokers are saying the level of enquiries and finance proposals is very high and order take is back up to the levels experienced prior to lockdown.
The continued upward used vehicle values point to a shortage of vehicles generally versus demand in the market – some used vehicles are now selling for prices higher than they were originally bought for.
This phenomenon has also been exacerbated by the number of contract extensions being experienced by LBF members – so fewer vehicles are coming off contract plus long lead times for new vehicles – result a perfect storm!
Another broker said it is likely that the current trend will prevail well into next year but will settle down eventually.
Rob King, Operations Director at Carlease UK said: “The current situation relating to semiconductors has very much affected the way in which we approach business. Even as a broker, which predominantly supplies pure electric vehicles, we have experienced the same difficulties as most leasing brokers; longer lead times, reduced stock options, smaller discounts and a more fragile order to delivery process with our customers.
“For our business, the impact of COVID actually served as a catalyst for our EV proposition and January – July 2021 Â proved to be beneficial both in terms of enquiries and deliveries. However, as we all know, there is a definitive cost to the enquiries we receive and unless we have a solution for the customer this is not a sustainable environment.
“Like many businesses, we feel the uncertainties in the market. It seems we have entered an era where there are significant reactions to events in the press and on social media such as fuel shortages, the electric vehicle revolution, rising used car prices and a general lack of new car production.
“Each week brings a new challenge, which means that our short to medium viability relies on our team working more closely and reacting more quickly to the developing landscape. We are advertising fewer vehicles on our websites and with our pricing aggregation partners, while avoiding certain manufacturers who have uncertain leads times or discount structures.”
King said “without a doubt”, retailers with prime new car stock are prioritising retail channels as opposed to the personal and SME contract hire market.
He added: “If they can achieve a better return on their product, then we completely understand. We appreciate the inflated prices on used cars in the UK will be helping some customers to enjoy new cars notwithstanding the less competitive deals which they will be offered.
“However, a move away from price may act to sanitise the new car leasing market which has, at times, become toxically obsessed with headline rentals. We expect more brokers to work more closely with their customers to assist them through this difficult period and so there are some positives which will emerge.
“The quality of our competitors is palpable to us, so we are confident many will use this to strengthen their offering. In light of a move towards electric vehicles, it is true to say that many of us had to change our customer processes anyway and ensure that our market reputation for clear, compliant and confident sales remains intact.”
