Chip-Limited Fall in Auto Sales No End in Sight | 2022-01-04
Duane Paddock is used to hauling over 800 vehicles to his eponymous Chevrolet dealership near Buffalo, New York. But these days, thanks to the semiconductor shortage, he sells most of the vehicles General Motors Co. sends him as soon as they arrive.
Since the dealership has almost no inventory, Paddock sales staff sell cars and trucks by showing customers a computer screen view of the cars’ appearance and placing orders. Then they wait. It works well enough that he thinks he won’t need to haul a lot of cars when, hopefully, the semiconductor shortage one day ends.
There is only one problem: There are still far more interested buyers than vehicles, which is why auto industry sales fell around 20% in the fourth quarter of 2021 and suffered the worst second half since the Great Recession over a decade. There are.
“This will be my lowest volume year in 20 years. We’ll end up with around 2,500 units when I normally do 3,300 to 4,500, ”Paddock said over the phone. “Everything I have, we sell before they arrive. “
Automakers likely sold a seasonally adjusted annual rate of around 12.5 million new vehicles in December, down 23% from the previous year, according to the average forecast of six market researchers. Most automakers will release their latest quarterly and annual new car sales in the United States on Tuesday.
For the year as a whole, auto sales likely hit 14.9 million vehicles, a 2.5% jump from the days of Covid in 2020, according to Cox Automotive. The 2021 total is a historic low for an industry used to selling around 16 million vehicles per year. The slowdown reflects a global shortage of microchips that has forced automakers to limit production or ship some vehicles without fully functional features.
December is generally a huge month for automakers, who typically use holiday promotions to fuel a year-end push. But not in 2021, Cox analyst Michelle Krebs said.
“It’s not a demand issue. It’s a supply problem, ”she said. “We have at least 1.5 million units of inventory late for 2020 and 2.5 million units late for 2019.”
Industry-wide, automakers had about 18 days of inventory in December, according to TrueCar, an auto pricing website. This is up slightly from the end of the third quarter, when automakers were valued at 16 days. But that’s still less than half of what they had a year earlier.
GM, which had maintained production at the start of the crisis, was particularly affected by the shortage of chips in the second half of the year. Toyota Motor Corp. will likely beat GM in US sales for the year because it was able to maintain higher production, Cox predicted.
TrueCar estimates that GM’s December sales fell 43%, which would be the biggest drop of any automaker. Toyota sales have fallen by about 30% and Ford Motor Co. is expected to report a decline of about 20%, according to TrueCar Projects.
Learn more about the semiconductor shortage:
Why major OEMs are turning to in-house chip production
Relentless global demand for chips turns deadly in Malaysia
Watch: Alleviating the Semiconductor Supply Shortage
What will replace silicon chips in the next generation of electric vehicles?
GM Predicts ‘Substantial Changes’ in Supply Chain As Chip Problems Last
How a Covid Case Disrupted Toyota’s Just-in-Time Supply Chain
GM had a record stock at the start of the fourth quarter due to downtime in the third, company spokesman Jim Cain said. The Detroit automaker’s production showed signs of improvement in the fourth quarter as more chips became available, he said.
To help cope with the shortage of vehicles, dealers say GM allows them to extend leases for customers who can’t find a new car.
Consumers who can find the vehicles they want are obligated to pay. Automakers use the semiconductors they get to build more profitable models and those with the most options, according to car buying research firm Edmunds. All of those premium pickup trucks and sport utility vehicles drove a record average price of $ 45,872 in November, up 15% from a year earlier.
Average December transaction prices for GM and Stellantis NV were estimated at more than $ 50,000 by TrueCar, the highest among consumer automakers.
The automakers said there had been some relief in the chip supply and they were starting to ramp up production. Inventories even rose slightly in late November, reaching 1 million vehicles for the first time since August, Krebs said.
Chip-related constraints did not appear to slow Tesla Inc.’s growth in the last three months of the year. The electric vehicle maker said on Sunday it delivered a record 308,600 vehicles in the quarter, beating analysts’ average estimate of around 263,000.
For the industry as a whole, analysts expect better access to semiconductors and an increase in vehicle production this year. Edmunds predicts 15.5 million vehicles will be sold in 2022 and RBC Capital Markets analyst Joe Spak sees 15.8 million as production increases.
This is good news for buyers and sellers alike, who are eager to see a better selection, especially of cheaper models. GM dealer Paddock said he hasn’t seen the economy Chevy Malibu sedan since early last summer and ends up each month with maybe three new vehicles that aren’t already sold at the advance.
“When are we going to get back to inventory?” I guess it’s two years from today, ”he said. “It’s going to take a long time before you see the inventory on the customer lots. “