Demand for new cars and light commercials here is too hot for even the market leader to handle.

FORWARD orders for new Toyota and Lexus models have reached 11,000 units, effectively six months’ sales, and buyers are generally in for prolonged wait times.

An unprecedented accrual for Toyota New Zealand affects every model it represents, general manager of new car sales Steve Prangnell (above) says, including one still to come, the next version of a traditional big seller, the Toyota Highlander.

Most of this year’s allocation of this United States-sourced sports utility, which has been priced but won’t become publicly available until July already appears accounted for, with the new hybrid dominating.

“We’ve taken 500 expressions of interest and it’s running at 90 percent hybrid.”

The market leader’s giant order bank has clocked up at a time when new vehicle demand is going through the roof, the first quarter of this year delivering record new light vehicle registrations.

TNZ has kept pace, if barely. Everything that has shipped in for months is essentially pre-ordered; in four recent shipments an astounding 97 percent of consignment was spoken for.

“We are not able to supply to what the market run rate is – it’s a combination of demand being higher than it’s ever been while we are under a supply constraint.”

Last month’s performance provides a good example. In the strongest April on record for new car sales, the Palmerston North-based franchise delivered 2400 vehicles … and took 3997 orders.

A brand that, in pre-Covid days, aimed hold between 1800 and 2500 vehicles in domestic reserve is now often finding the holding pen is all but exhausted.

“At the end of April we had 580-odd cars on the ground of which 48 were available for allocation. The rest were pre-sold.”

The company is taking names – but not deposits – and advising customers of likely wait times.

“There’s a varying degree of demand and delay. Out worst case, the RAV4 Hybrid, is subject to five to six months from order to deliver; Hilux is also quite constrained.”

Only a fraction of consumers have shown disinclination to put up with long wait times, Prangnell says. “Our cancellation ratio is nominal, less than one percent.”

The Covid-19 crisis is to blame, but now only indirectly. It’s a second issue stemming from this, an auto semiconductor/ computer chip shortage the global industry feels won’t be reconciled for another year, that is now a bigger problem.

This is also crippling players in other sectors, including the phone, gaming and household electronics industries that initially benefitted from achieving extra supply when the automotive sector throttled back on orders a year ago.

However, it is clear carmakers - who relies on chips for everything from the computer management of engines to driver assistance systems - have it the worst.

Ultimately the semiconductor shortage has made a bigger impact than Covid-19, Prangnell says.

Toyota Motor Corporation in Japan has not had to completely stall production at any of its plants, as other brands have begun to do, but every assembly line supplying New Zealand has been inhibited to some degree, Prangnell says.

Sixty percent of product it takes comes from Japan, 30 percent from Thailand and the remainder from North America.

“They all have a capacity limit that’s been imposed on them.

“Toyota has been in a slightly better position than some others because they did stockpile microchips last year, but there’s been another big rise in demand for consumer electronics and they didn’t reduce their orders to the same extent that the global automotive industry did and therefore they have more allocated supply.”

It could be worse. As much as TNZ is feeling the heat, it believes it is doing better than many distributors here and it also reckons its factories will ultimately win the race to restore to full and uninterrupted supply.

On that note, though, it says an in-house product ordering process that sees it lock in production forecasts up to three years in advance has also influenced – this time last year, the market was steeling for a collapse that never happened. Instead, consumer demand went against prediction and rose.

“Coming out of Covid everyone pulled their forecasts down and TMC reduced their orders for some raw materials. So they’re now struggling to get back up to maximum production capacity.

“This my 38th year with Toyota NZ and I’ve never seen anything like this before.”

It’s been reported some carmakers are leaving out features as a result of the chip shortage; last week Australian media cited that some BMW and Mercedes products ordered for their market won’t feature every driver assist technology and some advanced, supplementary safety features.

Prangnell assures Toyota and Lexus will not continence any such compromises for New Zealand customers.

“We have had that discussion with Toyota Japan, but the fact of the matter is that our safety systems are deeply integrated … the blind spot monitors, the emergency braking, the lane keep are all linked and we are not prepared to break that link.”

The changing environment has also begun to impact of recommended retails, but Prangnell says the two rounds of price increases that have impacted across the board this year have been pinned back to no more than $1000 each time and have also come with specification improvements.

And TNZ also honours prices that exist when orders are placed. “So even if the wait is six months, when the customer commits to us, we commit to them.” 

As remarkable as the situation has become there’s no sense of panic from TNZ.

It says the rollout of impending new models – acknowledged product including first-time electric vehicle inclusions for Lexus (the UX 300e, coming at year-end) and a Toyota equivalent set for 2022 release and probably the new Toyota 86 and a fresh Land Cruiser wagon – will go ahead as planned.

It also seems to see the high percentage of personal, rather than fleet, sales within the count as a validation of the push to restore Toyota cars as private ownership choices after years of it having prioritised bulk selling to the commercial sector, regardless that the latter remains an important client. 

In respect to that, however, potentially a stern test of TNZ’s resolve to wean off past practice of winning big corporate orders, often through offering discount levels competitors cannot meet, could be tested by relaxation of transtasman travel restrictions.

Winter is the busiest season for rental car operators and there is thought just the historic annual influx of Australians heading here to ski will be enough to cause major players to freshen fleets. In past years, Toyota has dominated that scene, with Highlander being a choice pick.

Those big performers might find the brand is much less willing to supply to the same terms as it used to, Prangnell has suggested, given that TNZ has moved to prioritise retail customers and retail fleet customers.

So are the days of discounting are over?

“That whole process is being re-imagined and re-negotiated.

 “The rules have changed. They have to.”