Vehicle Shortages: How to Keep Your Fleet on Track

With new vehicle demand continuing to outpace supply, here's how it might affect your fleet procurement and the steps LeasePlan is taking to keep businesses moving.

New vehicle supply in the UK has never been more challenging. Demand is surging, following a year where Covid-19 restrictions on production and sales contributed to the lowest new car registrations since 1992 [1,2]. However, that recovery is being hampered by a perfect storm of complications which are likely disrupt vehicle deliveries well into 2022. Here's what you need to know.

Modern vehicles rely on masses of semiconductor 'chips', which underpin everything from driver assistance systems to engine management. A combination of extreme weather [3,4,5] and reduced staff in the factories where they're made means these vital components are in short supply. With these specialist facilities taking six months to set up [6], and new Covid-19 outbreaks in Asia further threatening supply from existing suppliers [7], those shortages are expected to continue into next year [PP].

Manufacturers are taking steps to minimise disruption, and the effects vary. Some are prioritising production of popular models, or temporarily removing affected trim levels and equipment their line-up - including assistance-related features [8]. However, lead times of six months are now common for factory order cars, and they are often even longer for vans [9]. We are also hearing that vehicles are being supplied with certain non-critical features disabled until the required modules are available.

The knock-on effect of limited new vehicle supply is a surge in demand for used stock. BCA Group reported average transaction price of more than £10,000 for cars and commercial vehicles in August - the latter is an all-time high [10]. Cox Automotive adds that dealers are responding to shortages by taking older, higher mileage, used vehicles from brands they wouldn't normally sell [11].

This means there's lots of competition for end-of-contract stock, potentially affecting the availability of short-term rental vehicles which are becoming too valuable and sought after not to remarket. BCA Group is expecting even greater shortages of commercial vehicles as logistics companies prepare for the Christmas home delivery rush [10]. With a spike in demand for timber [12], there could also be supply constraints for vehicles requiring new ply lining or racking.

The Brexit transition period ended on 31 December 2020, giving barely any time for businesses to adjust to the finalised details of the deal signed during the Christmas period [13]. According to The Association of British Ports, uncertainty over customs rules contributed to a 9% reduction in freight tonnage through UK ports during the first quarter of 2021 [14]. The Road Haulage Association says a lack of clarity over living and working rights for EU nationals has also furthered HGV driver shortages, which are now estimated to be over 100,000 personnel [15].

In response, the Driver and Vehicle Standards Agency (DVSA) recently announced it will "streamline" HGV testing to free up examiner time and accelerate the licensing process for drivers [16]. However, the near-future effects are further delays at ports [17] and disrupted supply chains, reflected in empty supermarket shelves and longer lead times for some car parts, including consumables needed for repairs and servicing [18].

It's not all doom and gloom. Despite the disruption, LeasePlan UK is expecting a steady supply of new vehicles throughout the rest of the year, and there are some steps you can take to help keep your procurement on schedule.

• •
  Plan Ahead: Identify vehicles which will need replacement during the next 12 months, and begin conversations with suppliers as early as possible.
• •
  Consider Alternatives: Where like-for-like replacements are not available, are there other models which could meet your needs?
• •
  Talk to Us: We can provide you with access to our ‘LeasePlan Flexible’ stock, comprising vehicles from our own fleet. Many of which are sought-after plug-in hybrids with CO2 emissions under 50g/km.

While supply challenges persist, we will also offer a straightforward process for you to extend vehicle contracts for as long as you need. If this delays your ability to switch from a petrol or diesel car to an electric vehicle, we will also offset the resulting extra carbon emissions. LeasePlan UK is using the UN Carbon Offset platform, which supports green energy projects around the world.

[1] SMMT Media Centre. (2021). December 2020 New Car Registrations. [online] Available at: https://media.smmt.co.uk/december-2020-new-car-registrations/ [Accessed 14 Sep. 2021].

[2] Department for Transport. (2021). VEH0150: Vehicles registered for the first time by body type, monthly: Great Britain and United Kingdom [online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1001625/veh0150.ods [Accessed 14 Sep. 2021].

[3] NXP Semiconductors. (2021). NXP Resumes Operations at Austin, Texas Facilities Following Weather-Related Shutdown and Provides Revenue Update [online] Available at: https://media.nxp.com/news-releases/news-release-details/nxp-resumes-operations-austin-texas-facilities-following-weather [Accessed 14 Sep. 2021].

[4] Infineon Technologies. (2021). Infineon re-ramps production in Austin, Texas, and provides update on customer impact, pre-shutdown output level expected in June 2021. [online] Available at: https://www.infineon.com/cms/en/about-infineon/press/press-releases/2021/INFXX202103-054.html [Accessed 14 Sep. 2021].

[5] Wu, D & Wang, C (2021). Taiwan Cuts Water Supply for Chipmakers as Drought Threatens to Dry Up Reserves [online] Available at: https://www.bloomberg.com/news/articles/2021-03-24/taiwan-raises-red-alert-over-water-cuts-supply-for-chipmakers [Accessed 14 Sep. 2021].

[6] Yinung, F. (2021). Chipmakers Are Ramping Up Production to Address Semiconductor Shortage. Here's Why that Takes Time. [online] Available at: https://www.semiconductors.org/chipmakers-are-ramping-up-production-to-address-semiconductor-shortage-heres-why-that-takes-time/ [Accessed 14 Sep. 2021].

[7] BVRLA (2021). Vehicle supply issues risk recovery, says fleet industry. [online] Available at: https://www.bvrla.co.uk/resource/vehicle-supply-issues-risk-recovery-says-fleet-industry.html [Accessed 14 Sep. 2021].

[8] The Association of Fleet Professionals (2021). Fleets Should Think Carefully Before Buying Safety Decontented New Company Cars, AFP Warns. [online]. Available at: https://www.theafp.co.uk/fleets-should-think-carefully-before-buying-safety-decontented-new-company-cars-afp-warns/ [Accessed 14 Sep. 2021].

[9] Roberts, G. (2021). Semiconductor shortage to 'outlast' Covid-19 pandemic. [online] Available at: https://www.fleetnews.co.uk/news/fleet-industry-news/2021/08/03/semiconductor-shortage-to-outlast-covid-19-pandemic [Accessed 14 Sep. 2021].

[10] BCA Group (2021) BCA Dashboard - Car and LCV values remain on a high. [online] Available at: https://www.bca.co.uk/news/bca-dashboard---car-and-lcv-values-remain-on-a-high-20210823/ [Accessed 14 Sep. 2021].

[11] Cox Automotive. (2021). Dealers urged to brace themselves for further supply headwinds. [online] Available at: https://www.coxautoinc.eu/content-hub/fuel/car-market-tracker-august-2021/ [Accessed 14 Sep. 2021].

[12] Timber Trade Federation. (2021). TTF warns of major challenges ahead for timber users in Q3 2021. [online] Available at: https://ttf.co.uk/ttf-warns-of-major-challenges-ahead-for-timber-users-in-q3-2021/ [Accessed 14 Sep. 2021].

[13] Batchelor, J. (2021). Carmakers 'paddling furiously' to maintain post-Brexit supply chains, says SMMT chief. [online] Available at: https://cardealermagazine.co.uk/publish/carmakers-paddling-furiously-to-maintain-post-brexit-supply-chains-says-smmt-chief/217792 [Accessed 14 Sep. 2021].

[14] The British Ports Association. (2021). Q1 Trade Statistics Lift Lid on Brexit Impact. [online] Available at: https://www.britishports.org.uk/news/q1-trade-statistics-lift-lid-on-brexit-impact [Accessed 14 Sep. 2021].

[15] Road Haulage Associations (2021). Driver Shortage: RHA and freight industry write to Prime Minister Boris Johnson. [online] Available at: https://www.rha.uk.net/news/news-blogs-and-press-releases/press-releases/detail/driver-shortage-rha-and-freight-industry-write-to-prime-minister-boris-johnson [Accessed 14 Sep. 2021].

[16] Driver and Vehicle Standards Agency. (2021).Government takes further action to tackle HGV driver shortage. [online] Available at: https://www.gov.uk/government/news/government-takes-further-action-to-tackle-hgv-driver-shortage [Accessed 14 Sep. 2021].

[17] The British Ports Association. (2021). BPA: Government must act on supply chain pressures. [online] Available at: https://www.britishports.org.uk/news/bpa-government-must-act-on-supply-chain-pressures [Accessed 14 Sep. 2021].

[18] Bank of England. (2021). Agents' summary of business conditions - 2021 Q2. [online] Available at: https://www.bankofengland.co.uk/agents-summary/2021/2021-q2 [Accessed 14 Sep. 2021].