As Twin Cities Auto Show sets up, cars in short supply

The Twin Cities Auto Show is ready to open Saturday, but had plenty of hiccups along the way.

That's emblematic of the industry here in Minnesota and around the country right now.

The bottom fell out of the auto market a year ago, leaving some dealerships closed due to coronavirus pandemic restrictions and others stuck with large inventories as customers working from home postponed purchases.

The industry picked up in the last quarter of 2020 but left dealerships' sales about 20% lower than 2019, according to J.D. Power.

Minnesota dealerships felt a similar sting, said Scott Lambert, president of the Greater Metropolitan Automobile Dealers Association of Minnesota, which puts on the auto show.

The economic worry from the pandemic faded, but other issues have curtailed sales as the market returns to normal, he said.

And consumers will pay more because these new hiccups are causing inventory delays. The national Consumer Price Index released Wednesday showed new-car prices up 0.5% and used-car sales up 10%, the largest increase since 1953.

Manheim, the country's largest vehicle auction house, told Bloomberg News its wholesale prices increased 54% in April over the same month a year ago.

In February, dealers had trouble getting cars because of historic storms in Texas and the southwest. As car deliveries caught up in March, sales started to rise. In April, U.S. new-car sales totaled 16.5 million, up 2.3% from the same month in 2019.

It was a huge relief for dealers who in April 2020 saw the lowest monthly sales in 50 years, but it could have been higher. And dealers are looking at a May with lower sales because of even more inventory delays.

Lambert said there's a backlog of 1.1 million cars and light trucks because of a shortage of semi-conductor chips. Each car has an average of a dozen microchips. Minnesota dealerships, like the nation, have been hit hard by the delays.

In fact, the auto show faced a late challenge because of a delay in getting the latest models for display during the nine-day event that starts Saturday at the Minnesota State Fairgrounds.

"Populating the displays was a challenge we've never had before," he said. "We had to beg, borrow and steal."

Right now, many customers can't find exactly what they want on the lot. There may be limited colors or trims on bestselling models, especially trucks and SUVs, which make up 86% of new-vehicle sales in Minnesota.

"Customers have to be patient," Lambert said. Those who can't wait have turned to the used cars, adding to the frenzy and inflation in that market.

In the national used-car market, the inflation is driven by direct consumers competing with rental car companies, which couldn't find enough new cars as people were starting to travel again after receiving COVID-19 vaccinations.

As the semiconductor shortage recedes, economists think the auto market will adjust to prepandemic levels.

"This won't last forever. Things will get back to normal," Maryann Keller, an auto consultant in Connecticut, told Bloomberg.

The one category in Minnesota with more cars than demand is electric, Lambert said.

"That's where we're working on demand, not supply," he said.

The auto show has an electric display with cars and a model garage so people can see what they need to charge them.

Last year, the show was set to go on its normal dates in March at the traditional Minneapolis Convention Center venue. That was the week COVID-19 restrictions shut nonessential places and services down.

The dealers association decided in December that Minnesota wouldn't be open enough to hold the event in March and looked for an outdoor venue later in the year.

"This is the biggest show we've ever put on ... in the shortest amount of time planning it," he said.

Overall, Lambert is excited about the show, which has opportunities to drive some of the hottest vehicles, entertainment for families and a classic car area. Plus, the fairgrounds give a safer outdoor environment and the addition of fair food favorites.

"I think we'll have a strong show," he said.

(This story includes reporting by Bloomberg News.)