Car Dealer Inventory Is Running Lean Again Thanks to a Shortage of Trains
70,000 new cars are stuck at factories waiting to be shipped due to a shortage of rail cars.
The new car market isn’t quite yet out of the woods. Despite falling markups, rising inventory, and even some new car deals to be had, there’s a new challenge befalling automakers that has nothing to do with the cars themselves. A train car shortage has stranded some 70,000 cars that are ready to get shipped to dealer lots.
The shortage doesn’t just affect automakers. It reportedly has been brewing for months and is now building into supply shortages for food and grain, according to the Detroit Free Press. Of the automakers affected, General Motors is one of the hardest hit, though the issue could spread across the industry if left to fester. It is apparently serious enough that auto industry lobbying groups and the Department of Transportation are investigating the issue and trying to preempt the bottleneck from getting smaller.
According to John Bozzella, CEO of the Alliance for Automotive Innovation, a typical year of rail transportation for automakers includes moving 1.8 million vehicles; over 75% of the new cars sold in the U.S. The backlog of rail cars, specifically autoracks, poses a huge issue for the auto industry. And as ever, it is caused by underinvestment.
Surface Transportation Board Chairman Martin Oberman is “very concerned” by the issue. Speaking on the root cause of the issue, Oberman says that “underinvestment in equipment and labor by BNSF has resulted in a severe shortage of the railroads’ ability to move cars to major auto manufacturers.” Oberman says that automakers have reduced production numbers in response, in some cases up to 50,000 fewer cars. All of this results in a $350 million direct impact to U.S.-based suppliers and apparently an impact of $3.75 billion to the U.S. economy.
This is a complex issue that doesn’t have an easy fix in sight. While more cars are being built and the light at the end of the tunnel is visible, this could prove to be a major hurdle.
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