Press Club

Arlington Car Dealerships Plagued by Effects of National Chip Shortage

Mercedes-Benz of Arlington in Ballston (via Google Maps)

Many Arlington car dealerships are struggling to stock cars amid a nationwide shortage of computer chips.

At Mercedes-Benz of Arlington in Ballston, formerly known as American Service Center, a lot once stocked with around 130 used cars available for sale has emptied out to 63 vehicles, according to Ron Moghisi, who manages pre-owned sales. He said many of the cars were purchased at nearly 30% over the normal list price.

“There’s a lot of demand, but there’s just nothing for us to buy and to resell, because the price is so high that it won’t make sense,” Moghisi said. “Let’s say you buy a bicycle for $10 that you can sell for $12. It doesn’t make sense to buy it for $16, because you’re going to get stuck with it. Some dealers are taking the risk and buying them, and God help them.”

Employees at the Koons Arlington Toyota and Brown’s Arlington Honda dealerships in Cherrydale told ARLnow they also have fewer available new and used cars to sell. At Brown’s Honda, around 50 used cars are currently available for sale, whereas 150 to 200 cars would normally be in stock, according to a pre-owned salesman. Prices at the dealership are up between 20% and 45%, in line with used car price increases nationally.

The scarcity of computer chips can be traced back to the beginning stages of the coronavirus.

When lockdowns first went into effect, car sales crashed, leading automobile companies to reduce orders for chips and other parts. Chip manufacturers, in response, cut production in order to avoid financial losses.

The strategy helped chip companies survive the pandemic. As car sales bounced back, however, automobile companies found that there weren’t enough chips for them to maintain the levels of production they wanted, as ramping up chip production can take a long time. Ford Motor Company slashed production by 50%. Meanwhile, Jeep temporarily stopped manufacturing two of its models because it didn’t have the chips needed to make them.

As the supply of cars dwindled, dealerships around the country, including those in Arlington, suffered. At the Mercedes-Benz dealership, Moghisi said that the low supply of both new and used cars has forced the dealership to hike its prices for used cars in order to maintain profitability.

“There are not many new cars around, which really means people are not trading [in] their cars, and therefore, there’s a shortage in the market for premium cars,” Moghisi said.

According to Eddy Malikov, the manager at the used-car dealership Arlington Auto Group, consumer demand is starting to decrease as a result of the rise in prices.

“I think there’s less demand now in the U.S market at least from what our business has seen. We sold around 30 cars in the first two weeks last month. This month we’ve done around 18 vehicles,” Malikov said. “I would say demand might be going down and prices and supply are going back to where they should be.”

For Moghisi, as the shortage stretches on, the stress builds for him and his employees.

“We’ve been playing the waiting game — just have to wait and see what happens. We buy whatever we can get, which is not enough,” Moghisi said. “The way this has affected the industry is, dealerships are making less money, which has put a pressure on employees. If there are no cars to sell, we can’t make a living.”

It could be a while before the automobile industry and car dealerships have fully recovered from the ongoing chip shortage. Intel CEO Patrick Gelsinger told analysts last month that the chip companies may not catch up to demand for another one to two years.

“We hear different stories. We hear it’ll be fixed by November, December, then we hear by next July. We don’t know,” Moghisi said. “I don’t think we’ll have to shut down the department. Eventually, it’ll get fixed, it’s just a matter of time. The only issue is we have to dig into our savings.”

Photo via Google Maps

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