New car sales up in 2021, but long before a full recovery

DETROIT (AP) – New vehicle sales in the United States rebounded slightly last year from dismal 2020 numbers, but forecasters expect them to be more than 2 million lower from years before the coronavirus pandemic.

The reason? Although there are many customers who want to buy new vehicles at high prices, there are still not enough computer chips for the industry to fully start its factories. So supplies are limited, prices high, and many customers cannot get what they want.

“Demand is not at all down,” said Michelle Krebs, executive analyst for Cox Automotive. “What is wrong are sales, because the inventory does not exist. “

Cox expects 2021 sales to be 14.9 million vehicles, up 2.5% from 2020, the year the pandemic hit the United States and forced the industry to close for eight weeks. But in the five years leading up to the pandemic, sales averaged 17.3 million.

Among those hardest hit by the chip shortage was General Motors, which was dethroned by Toyota last year as the nation’s best-selling automaker for the first time.

GM reported on Tuesday that last year’s U.S. sales fell nearly 13% from 2020 levels to just over 2.2 million. Toyota, on the other hand, saw sales increase 10.4% to just over 2.3 million.

Like other automakers, GM was forced to temporarily shut down factories during the year as it struggled to obtain semiconductors, particularly at the start of the year. Krebs said she doesn’t know if GM will be able to dislodge Toyota this year because Toyota has handled the chip shortage better and has faster distribution.

GM has diverted limited supplies of chips to higher-margin pickup trucks and full-size SUVs, boosting the company’s bottom line, spokesman Jim Cain said. At the start of last year, GM forecast a pre-tax profit of $ 10 billion to $ 11 billion, but expects the year to end around $ 14 billion, he said.

The company, Cain said, expects the chip shortage to ease this year, with more chips available in the second half of the year.

Other automakers that reported full-year sales figures included Honda, with an 8.9% increase, while Hyundai recorded a jump of 18.6%.

Analysts and industry executives say that while chip supplies are improving, it is not certain that they will return to pre-pandemic levels. The average gasoline-powered vehicle has about 1,000 chips, and electric vehicles can have more than double.

IHS Markit analyst Phil Amsrud, who tracks automotive chips, said supplies would not immediately improve.

“We see 2022 as an improvement over 2021, but it won’t start on January 3 or 4,” he said, adding that the second half should be better than the first.

There are, however, signs that the number of vehicles on dealership lots is increasing. It rose to over a million last month for the first time since August, Krebs said. But it’s still 1.5 million less than in 2020 and 2.5 million less than in 2019.

Cox predicts that new vehicle sales in the United States will increase by more than one million this year, to around 16 million.

Amsrud attributed the growth in vehicle inventories more to automakers that cope better with the chip shortage, rather than a dramatic growth in chip supplies. Like GM, many have allocated chips to build more expensive models.

David Kelleher, owner of a Stellantis dealership in Glen Mills, Pa., Near Philadelphia, said he doesn’t see much change in auto sales and prices this year or next, but it is. satisfied.

He is making record profits, selling just about every vehicle he gets at the sticker price, while customers are happy to find vehicles. They also get high prices for trades because used car prices have skyrocketed.

Homeowners have an average of $ 10,199 in equity in their transactions, which is 83% more than a year ago, JD Power said.

“The customer right now just wants the (right) experience and the car,” Kelleher said. “If you have the car and you give them the car, they’ll be happy with you.”

Normally, Kelleher would have 750 vehicles for sale on his lot. Now he’s 12. But he doesn’t pay interest on inventory and was able to cut advertising by 30%.

Randy Parker, Hyundai’s head of sales in the United States, said dealers got better at internet selling when the pandemic started and they are able to keep customers waiting until the exact vehicle. they wish arrives from the factory. “We have improved a lot in the pre-sale of our inbound pipeline,” he said.

Due to high demand and low supply, JD Power says the average price of new vehicles rose to $ 45,743 in December, up 20% from a year ago and for the first time. times it has exceeded $ 45,000.

Sedans are certainly not driving demand for new vehicles. JD Power reports that SUVs and pickup trucks accounted for a record 80.2% of new vehicle sales in December.

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