The pandemic exposed a “structural gap” between chip production and demand, and the disruption from the virus has only exacerbated the imbalance, Keogh said. But it hasn’t been all bad for automakers.
Tight inventory has led to soaring prices and minimal incentive spending, padding the companies’ bottom lines. That helped Volkswagen’s U.S. business turn a profit in 2020 for the first time in eight years, Keogh said, following a revamp of its lineup from sedans to SUVs.
When semiconductor shortages eventually ease, Volkswagen plans to keep fewer cars on dealer lots, because it has proved to be more profitable for manufacturers and dealers, Keogh said.
“Going back to the days of having 100 to 120 days’ supply is not going to happen,” he said. “Now, people have 30 to 40 days’ supply and it’s working quite fine. Somewhere in that 40 to 50-day camp would be a beautiful thing.”
Does anyone remember all the talk about building resilience into the supply chain after the pandemic. The reality seems to be very different. Companies have found limited supply is working just fine for their businesses and they are achieving better prices than they thought imaginable only a couple of years ago.Click HERE to subscribe to Fuller Treacy Money Back to top