Navigating Availability Issues

As the industry begins to see some light at the end of the Covid19 tunnel, the automotive sector was hit with another blow – a global semiconductor shortage. The result? Manufacturers had to reduce and in some cases halt production, leading to demand far outweighing supply. The market has seen some progress, but vehicle availability is still causing issues for fleets.

Many fleet operators have already experienced the problems caused by limited vehicle availability. Last year, lead times slipped across all manufacturers, which on average was between 6-12 months for new vans and cars. Manufacturers started to cut options in order to try and increase volume of production. However, manufacturing costs started to rise, raw material pricing went through the roof and price increases started. Manufacturers have a CO2 cap they need to hit, which saw many diesel and petrol vehicles discontinued or cancelled without notice. Manufacturers have continued to introduce price increases, despite not being able to produce anywhere near as many vehicles as the UK market needs.

Most predicted that 2022 would bring a glimmer of hope to these challenges and things are starting to slowly go in the right direction. Manufacturers’ average lead times are now 6-10+ months – but there are still some models going into production in 2023, particularly key models in the electric and plug-in categories.

In some instances, manufacturers have had to suspend ordering on certain models until they can catch up with demand. In conjunction with this, fleet operators are seeing several of their manufacturer terms reducing, in an effort to slow the demand. Whilst many feel a little déjà vu from 2021, leasing providers are experiencing a lot more clarity on lead times and manufacturers have made it clearer on the actual impact on production.

As a leasing provider, there are a number of challenges week to week, including:

  • Manufacturers revising terms (lowering manufacturer discount will drive costs up, thankfully a large part of this is being offset by higher-than-average projected used market values)
  • Manufacturers setting short-term times (normally manufacturers would set terms for the year, but the industry has seen them reduce to 3 months, which means fleet operators terms could change throughout the year)
  • Vehicle availability (vehicles are quotable one week but then not the next week with no notice)

What can you do to avoid disappointment?

As you can imagine, trying to manage these changes at the speed in which they happen, makes it incredibly difficult for leasing companies to supply a consistent choice list for fleets and their drivers.

JCT600 VLS, like many of the leading industry providers, are providing suggestions of how the impact of these issues can be reduced:

  1. Ordering all renewals for 2022 as soon as possible. This will help with price protection, getting vehicles closer to the dates they are required and allow leasing companies to order vehicles that are still available to order.

  2. Have a fluid choice list. Whilst the industry continues to provide a choice list, it helps to make it clear that this can change at any moment (much more frequently than in the past) and to order asap to avoid disappointment or further delays.

  3. Make sure your current fleet is optimised. If you have vehicles due for order, which have extended lead times, speak to your leasing company’s team to discuss whether you can formally extend vehicles to help improve the current running costs.

It is not yet known when vehicles will be back to normal production and with the looming energy crisis threatening to disrupt prices further, this year will certainly be one that continues to evolve and change. To avoid disappointment and disruption to your fleet, don’t wait to order, get ahead and order early. Preparation is key.