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Staff photo by Mike Pare / Marshal Mize Ford on Highway 153 in Chattanooga says shortages of new autos has affected used vehicle sales and prices.

Damon Skates said Tuesday that strong sales of new vehicles coupled with the semiconductor chip shortage at the automakers are leading to a scarcity in cars, trucks and SUVs at dealerships.

"The lots don't look pretty out there, but sales are good," said Skates, the general manager of Jackson Chevrolet Buick GMC in LaFayette, Georgia.

While Memorial Day weekends historically mean high auto sales, dealers are grappling with low inventory levels. Nationwide, there are nearly 1.4 million fewer new vehicles in inventory at dealerships this May versus a year ago, or a 42% reduction, according to the research firm Cox Automotive.

Skates said that a good percentage of the vehicles his dealership has on order are already sold.

"It will be a little while before inventory starts to build," he said.

Brent Morgan, president of Integrity Automotive Group in Chattanooga, said he's seeing a shortage on certain products, such as full-size trucks and SUVs.

"GM has done a great job of shifting production to the most popular and fast-moving," he said.

While Integrity's dealerships, which include Chevrolet, Buick, Cadillac and Mazda, have seen a consistent flow of vehicles, they don't have as many on the lots, Morgan said.

"We're able to fill most orders," he said. "We'd like to have a few more."

Thad Narramore, new vehicle sales manager at Marshal Mize Ford in Chattanooga, said there's "definitely a big supply and demand problem."

While sales have been good for the last year, they could be better if there were more inventory, he said.

Also, shortages among new vehicles has affected used vehicle sales and prices, Narramore said.

"We're not taking as many trades," he said. "That dries up the used car market. If you have a really nice vehicle, you can sell it pretty quick."

Morgan, too, said the used-car market is tight.

"There's very strong demand right now in the economy in general," he said. "A lot of people are looking to buy vehicles, new and used."

Skates said that automakers have cut back on new vehicle sales to fleets.

"Rental companies are buying used cars," he said.

Cox Automotive is expecting tight inventories to remain throughout the summer and possibly for all of 2021.

Production shutdowns during the initial coronavirus crisis last year and supply chain disruptions including the global computer chip shortage have left the industry with too few vehicles, according to Cox.

The supply shortage means buyers will likely pay more, and sales incentives are also low, and dropping, in 2021, the firm said.

In Chattanooga, Volkswagen's assembly plant will suspend production later this month due to the semiconductor shortage, according to the automaker.

The VW plant will suspend assembly during the weeks of June 7 and June 14, with regular production restarting June 21, the company said.

Contact Mike Pare at mpare@timesfreepress.com. Follow him on Twitter @MikePareTFP.

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