It will be tougher to get a parking space in Palm Beach

“Rolls-Royce, Bentley, BMW Sales Surge as Cheaper Brands Lag Behind” (WSJ):

The most luxurious brands such as Rolls-Royce, Bentley, Porsche and BMW have reported record sales.

Bentley sold 14,659 cars last year, an increase of 31% from the year before and a record for the company. Porsche, also owned by VW, sold 301,915 cars, an increase of 11% world-wide. Both brands posted growth in the U.S., Europe, and China.

Rolls-Royce, owned by Bayerische Motoren Werke AG, whose tailor-made superluxury cars have starting prices of more than $300,000, sold a record 5,586 cars last year, up 49% from the year before.

Martin Fritsches, president of Rolls-Royce Motor Cars Americas, told the Journal that buyers of superluxury cars like Rolls-Royce are younger today. The average age of a customer is about 43 years old, which means many of their clientele are in their 30s.

In part, Mr. Fritsches said, Rolls-Royce’s wealthy customers have been sheltered from the hardships felt by many during the pandemic. They benefited more from the economic recovery, the cryptocurrency boom and soaring stock prices. And many of the buyers are first-time Rolls owners, he said, including young entrepreneurs who got rich on the stock market and cryptocurrencies.

Meanwhile, when we took our Honda Odyssey in for an oil change recently, the dealer had exactly 0 new Hondas in stock. If we’d wanted to replace our Odyssey it would have required paying 20% more than we paid a year ago and waiting 1-2 months.

“Global chip shortage: Everything you need to know” (TechRepublic, November 2021):

A shortage in the supply of semiconductors first hit the automotive industry during the COVID-19 pandemic and has had a cascading effect, causing global disruption. The shortage can be traced back to the first half of 2020, when overall consumer demand for cars declined during the lockdown. This forced chip manufacturers to shift their focus to other areas, such as computer equipment and mobile devices, which spiked in demand with more people working remotely.

Part of the problem is that the return on investment isn’t compelling enough to build new foundries—which cost billions of dollars and take years to construct—to satisfy the demand by automakers, according to IDC. Automakers operate in a just-in-time environment without business continuity planning, according to Mario Morales, program vice president of the semiconductor group at IDC.

After they canceled orders early on in the pandemic, disgruntled suppliers turned to other markets that were still doing well, such as consumer electronics, and automakers found themselves lower on the priority list.

I still don’t get it. A replacement for our Odyssey is at least $7,000 more than we paid for the identical vehicle in January 2021. Let’s say that Bidenflation has driven up Honda’s costs by $3,000. Assuming that Honda made a profit on our Odyssey, Honda could still pay up to $4,000 for some chips and sell Odysseys at a profit (they’d have to raise the price to dealers so that Honda recovered the $3,000 premium over sticker that the dealer is currently charging). Apple can’t pay $4,000 for the chips that go inside a $1,400 iPhone. Microsoft can’t pay $4,000 for the chips that go inside a $500 Xbox Series X. Econ 101 suggests that the car companies can outbid anyone other than the U.S. military for the chips that they want. How is it possible that integrated circuit supplies are limiting car production?

Consistent with the WSJ article, I did find a Cadillac available for immediate delivery near the Venice (FL) airport:

“Microlino EV, Adorable Two-Seater, Going into Production in Europe” (Car and Driver):

“Our goal was to deliver the first vehicles to customers within the end of the year [2021], but the worldwide supply-chain chaos is affecting us like many other carmakers,” the company indicated. “Despite our preparations to order crucial parts way in advance, the situation has gotten much worse and is now affecting more and more parts. Now, even commodity parts like simple connectors for the wiring harness have become scarce and have lead times of up to 50 weeks!”

11 thoughts on “It will be tougher to get a parking space in Palm Beach

  1. Two options among many:

    1)the chips come from specific lines that cannot be easily expanded or replaced on these timescales.
    2) If Honda did this alone they could make a lot of money, but if Toyota etc also do it they end up with the same prices as usual, and same profits. This way they’re making $4000 extra profit on every unit sold, even if it’s fewer units. 80% of us market is like 5 companies or so? Not that hard to not try too hard to fix the supply chip issue, as long as other can check you’re not fixing it.

    Stock prices for all major automakers are up, so it doesn’t look like this chip thing is hurting them.

    • That’s a great point. These companies aren’t in business to make cars, but to make money. I wonder if a permanent “chip shortage” would be optimum for profits. Make 15% fewer vehicles, but get 2X the profit on each one.

      As for the “it takes time” argument, after how many years do we say that the market should be able to adjust? says that the chip shortage was bad enough in February 2021 that Uncle Joe issued an executive order on the subject. I cling to my belief that a full year is enough time for an IC fab to switch from making chips for readily available $29 toys to making chips for scarce $50,000 automobiles.

    • yeah my understanding is that the chips in demand from car companies come from older semiconductor processes, and it is a hard sell to the chip companies to invest in capacity for old chips.

    • The problem is that Chinese [electric] car manufacturers are coming to eat their lunch, big time. There is no permanent vacuum, whether in gases, demographics, or business. When the incumbents get lazy/complacent/incompetent, new and hungry players push in.

  2. Honda announced new all-electric line-up for 2023-2024. I think it may be a part of all-American and global push for plug-in vehicles only. I will try to run my current efficient vehicle for as long as I can.

  3. The lion kingdom suspects TSMC was losing money & they know prices are going to be a lot higher in the future, so they’re not making anything until Bide gets re-elected.

  4. Why is no one producing classic cars? I don’t want navigation, surveillance, anti-skid system etc.
    I want a Ferrari GTO, but I don’t have $60 million.

  5. Apple doesn’t pay $1400 for its chips because it has long-term contracts with TSMC and in fact helped finance its leading-edge fabs (which cost about $20B each). Apparently Intel is cutting a similar deal with TSMC if Ben Thompson is to be believed:

    Everyone else has to fight for scraps, and in any case automobile components work in a harsher environment than computer/tablet/phone chips and for reliability are made on older process nodes like 28nm or 45nm that no one builds new fabs for (as opposed to downcycled ones from 20 years ago when they were cutting-edge).

    Taiwan’s No. 2 chipmaker offered to build a new 28nm fab for automakers if they would commit to a $1B guaranteed spend. Needless to say, they automakers did not put their money where their mouth was and instead put political pressure on the Biden administration to lean on the Taiwanese government to pressure TSMC into allowing them to skip the line.

    Honda is not that well connected politically. It’s a Japanese firm that has a minor market position in Japan and makes of its money on the US market. At one point they considered moving their HQ to the USA but didn’t do so, and as a non-US non-union company they didn’t get the preferential treatment.

  6. Currently you’re pretty much paying MSRP for a car on most in demand vehicles (unless you’re a dolt who buys into adjusted dealer markup bs), so given there was a small increase in price accounting for a few percentage increase per model year update, you are saying that you got a Honda minivan for ~7k under MSRP – really?

  7. Bitcoin is down 50% from its peak and the NASDAQ is getting the vapors – what are all those guys with the new Bentleys going to do with their cars?

    Interestingly, I got a text the other day about the sale of another 2010 Ford Escape Hybrid with 10,000 more miles than the one I currently own – and without as many options – and the seller (a car dealership in MA in a pretty wealthy town) is asking almost $14,000, which is awesome! A year ago, I couldn’t have hoped to get more than $8,000.

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