Vehicle Sales Continue Their Depression
Anyone want to buy a vehicle? A better question might be: anyone got a vehicle for sale? Whether because of supply side issues, demand side issues, other issues, or all of the above, the fact remains that the first quarter of 2022 was not a good quarter for vehicle sales. Just ask the manufactures who saw double digit drops in new light-vehicle sales:23% for Honda; 20% for GM; 17% for Ford; 15% for Toyota; and 14% for Stellantis. While the numbers sound like doom and gloom, the manufacturers were not dour. Honda was quite positive about its numbers, noting that demand was strong and they just could not make enough vehicles to sell more, “we’re riding a bit of a roller coaster due to fluctuating parts supply issues, but strong March sales for Honda and Acura speak to the fact that demand remains strong and our retail deliveries are based primarily on what we can supply to our dealers.”
Some other interesting tidbits from sales data:
Electrified vehicles accounted for almost 26 percent of Toyota’s total sales for the first quarter;
Edmunds reported that the average monthly payment for new vehicles is expected to climb to $648 — the highest level ever; and
Semiconductor chips continue to be the holy grail for auto makers to the point that GM credited managing that portion of its supply chain with leading to market share gains in truck sales.
As a result, LMC Automotive and Cox Automotive each reduced their full-year U.S. light-vehicle sales forecast to 15.3 million units, citing a slower pace to recovery from market constraints. LMC referred to inventory levels as “critically low.” Cox led its report by noting that not only are inventories low, but prices are high and sales incentives have vanished (note – this is how that entire supply/demand thing works). Cox laid it all at the feet of supply: “Auto sales will basically be stuck at the current level until more supply arrives.”
Globally, the pandemic is not over. This continues to have the potential to drastically impact global vehicle volumes, especially in China. Global vehicle production could lose up to 1.5 million units this year if China’s COVID-Zero policy is maintained, according to estimates from Fitch Solutions quoted in Bloomberg. Most recently, phased lockdowns in Shanghai in response to COVID-19 outbreaks disrupted production for several major automakers and suppliers.
Add to that, the ongoing microchip shortage (for which no end appears in sight) is causing production downtime at various plants: Jeep production at Stellantis’ Mack Assembly plant in Detroit and Belvidere Assembly plant in Illinois; Chevrolet Silverado 1500 and GMC Sierra 1500 production at GM’s Fort Wayne Assembly plant; and Mustang production at Ford’s Flat Rock Assembly plant. Let’s not forget the war in Ukraine, leading to German automakers potentially losing up to 150,000 units of production in March due to supply disruptions.
Oddly, the industry feels both healthy (revenue, profits, margins, etc.) and stressed with an unceratin future (see above) all at the same time. Also oddly, but strangely not so oddly, nothing about this situation feels new. Is this the new normal?