Where Did the Cars Go? Vehicle shortages hit buyers, sellers, renters, and tourism agencies.

• Author: Erickson, Nancy
• Position: RETAIL

"I grew up in the car industry. Everything I've ever done has been in the car industry," says Steve Allwine, president of Mendenhall Auto in Juneau. "I have never seen this set of circumstances ever in my lifetime."

The problem is a lack of supply. "On the new car side, we don't have a lot on the ground at any given time," Allwine says of his Jeep, Subaru, Toyota, Honda, and Chevrolet stores.

Anyone shopping for a car or truck lately may have noticed a certain barrenness at dealerships, not just in terms of inventory on the lot but an absence of coffee and snacks in the waiting area. Marten Martensen, owner/dealer of Continental Auto Group's five stores in Anchorage, says cutbacks have reached that deeply. He's also had to eliminate costs such as courtesy shuttles and advertising and reduce his payroll by forty to fifty employees.

The supply problem began as a sudden drop in demand that was triggered, of course, by COVID-19. Then the pandemic's sticky tentacles entangled the microchip industry, which extended into auto manufacturing, then auto sales and rentals, and now even tourism businesses are suffering a double blow for lack of automobiles.

In a state as dependent on travel as Alaska is, the auto and tourism sectors have had to get creative to meet the supply chain issues head-on.

Chain Reaction

Two years ago, the auto industry was chugging along fine, with between 15 million and 17 million new cars sold annually nationwide, plus three to four times that in used cars.

When COVID-19 arrived, the economic uncertainty halted car sales. "Meanwhile rental car companies are selling off their fleet," says Charlie Vogelheim, an auto industry advisor. "Nobody's traveling. Nobody's renting cars. People are starting to cancel their orders and hunkering down."

Seeing a drop in demand, suppliers of microchips postponed plans to ramp up manufacturing. Power outages in Texas last winter also slowed down chip production in that state.

Auto demand has returned, but without the microchips that modern cars and trucks depend on, manufacturers can't keep up.

"Within a couple months, the auto industry, in and of itself, starts to recover, but now we've got a problem in terms of the supply chain," Vogelheim explains.

Eighty percent of global microchip supply now comes from Taiwan and South Korea. Vogelheim--executive editor at Kelley Blue Book, vice president at J.D. Power and Associates, and host of the weekly podcast "Motor Trend Audio"--says the United...