U.S. dealers are snapping up Canada’s used cars ― and London’s car lots are feeling the pinch
IF YOU’VE HAD a tough time buying a car lately, it’s not all just in your head, and there’s a reason for it: the Americans are raiding our used car auctions.
New cars have been in short supply this year, as a global shortage in the semiconductor chips that power the many digital features — core functions and digital accoutrements alike — found in today’s cars. Almost every automaker on the market has been forced to slow production, with estimates suggesting that the world market could see a shortage of between 1.5 million and 5 million vehicles just this year.
What’s to account for the shortage? Several reports have pointed to the sharp uptick in demand for electronics over the course of the pandemic as one factor. In a potentially ironic twist, the shortage is also at least partly rooted in climate change. Taiwan — one of the most reliably rainy places on earth, and the producer of 90 per cent of the world’s semiconductors — experienced an unusually dry monsoon season, with no typhoons making landfall last year for the first time in more than 50 years. That had the effect of their water reserves at the lowest levels they’ve ever been, plunging the country into drought and significantly slowing the production of semiconductors.
Story Continues Below
Half a world away, that’s having quite the impact on the car market in Canada. With new cars harder to come by, and post-pandemic demand starting to rev up, American auto dealers are hungry for used cars and are looking north to satisfy that demand. With larger budgets, and helped by a strong Canadian dollar, auto dealers stateside are buying up used cars in Canadian auctions, leaving Canadian dealers with scant supply.
“It’s definitely happening, especially when it comes to trucks,” says Junaid Mizra, owner of London Prime Auto Sales on Oxford Street West. “The truck market is almost all Americans buying.”
London Prime Auto Sales at 611 Oxford Street West
Canadian dealerships, which in the past would be a major supplier for Mizra, are now more hesitant to part with their supply.
“It pushed all the dealers to focus more on used cars,” says Mizra. “They still had to survive.” When they are able to purchase used cars from dealers, Mizra says the margins are much tighter than they were before, as the auction prices have increased.
“They’re not wholesaling as much,” he says. “They’re trying to sell it themselves.”
Story Continues Below
As for when this bottleneck in the supply chain will ease, you might be waiting a while — auto manufacturer Volkswagen, for instance, has warned that the second quarter of 2021 is likely to be worse than the first quarter, as they are still unable to get their hands on semiconductor chips. While the U.S. government has indicated that it wants to boost domestic production of the chips, those won’t be ready for market anytime soon.
So, how long will this last? “That’s a good question — as long as Covid lasts,” estimates Mizra. There are some early signs of improvement for used car dealerships, he says, but it’s a problem that will be solved in a matter of months, not weeks or days.
“I would probably be putting it around fall time,” he says. “It is getting better, and the market is getting better.” Kieran Delamont