US Car Sales Plummet As Buyers Stranded By Chip Shortage | Automatic features


Soumya Rangarajan wanted her next car to be electric. She placed an order for a Volkswagen ID.4, but after six months of waiting to get her hands on the sport utility vehicle, she gave up. She decided to buy out the lease on her gasoline Ford Escape instead.

“I would still love to have an electric vehicle, but I buy my Escape because I need something to drive,” said Rangarajan, who works as a hospital doctor in Ann Arbor, Michigan. “I just don’t know how long this heist is going to be.

The automakers don’t know that either. After sounding an optimistic note in the first half of the year as soaring car prices inflated profits, auto executives became more resigned to supply chain headaches after recent outbreaks of COVID-19 in Malaysia have hampered semiconductor production. This in turn depleted vehicle inventories, driving up prices for new and used cars.

“I think everyone had some kind of comeback moment after hoping in the first half of this year that things would get better,” said Haig Stoddard, analyst at Wards Intelligence. “Things are getting worse and they are not going to get better, at least until the end of this year.”

Automakers likely sold around 12.3 million new vehicles at a seasonally adjusted annualized rate in September, down 25% from a year ago, according to an average of six market research forecasts . That’s below the pace of August 13.1 million, and a downright boost from the near-record annual rate of 18.3 million in April, supported by a new supply of crisps.

U.S. auto dealers had just 17 days of new car inventory on their lots in September, up from 42 days a year ago, according to the TrueCar market research. The average September inventory from 2015 to 2019 was 64 days, according to Wards.

Most automakers were due to release their latest US sales figures for the final quarter on Friday. Ford and Tesla, which only post worldwide sales, should follow suit the next day.

General Motors, which idled key truck factories in September, probably had the biggest sales hit among major automakers. Shipments may have fallen 58% this month compared to a year ago, according to Joe Spak, analyst at RBC Capital Markets.

While auto makers in Detroit have generally fared worse than their Asian counterparts in the chip crisis, Toyota, Honda and Nissan have also faced supply constraints and shutdowns this month, Spak wrote. in a note of September 23.

Bottlenecks extend beyond the chips. Rubber, electrical parts and components are scarce; there is also a labor shortage and shipping bottlenecks, Stoddard said.

“The whole supply chain is collapsing because manufacturers cannot meet aggregate demand,” he said.

The lack of new vehicles is also affecting the used car market. The average price of used vehicles hit a record high of $ 25,829 at the end of August, a jump of 34% from the comparable period before the pandemic in 2019, according to Cox Automotive. Used car sales have also slowed due to lack of supply, according to Cox senior economist Charlie Chesbrough.

Carlos Hidalgo Jr., general manager of a Chrysler, Dodge and Jeep Ram dealership across the San Francisco Bay Area, said he paid $ 2,000 more than the lease value to buy back a Jeep Grand Cherokee 2018 this week.

“It’s a better way to stock up on vehicles because if we’re going to auction we have to pay through the roof,” he said.

The San Leandro, Calif., Dealership lacks new models like the Pacifica hybrid minivans, plug-in hybrid Jeep Wranglers and Dodge Charger Scat Packs, popular muscle cars powered by a 485-horsepower Hemi engine. Hidalgo’s father, who owns the dealership and shares his name, said nine in ten customers choose to buy out their lease rather than trade it in for a new car.

Car manufacturers and dealers are doing everything they can to sell the few cars they have left. Robert Loehr, who owns a dealership in Cartersville, Ga., Just delivered a Ram 1500 pickup to a customer in Biloxi, Mississippi, who found it online. Stellantis NV, which owns the Ram brand, builds Ram trucks without certain chip-dependent features like blind spot detection that are supposed to be standard, and then offer a rebate to customers as compensation, he said.

Loehr normally has between 300 and 400 cars on his lot. As of Tuesday, he was 61, although he said tight inventory helps his business.

“From a floor plan and insurance perspective, it costs me a lot less to house and maintain 60 cars than 350 cars,” he said. “So I don’t have to earn that much per car, and I’ll make more money at the end of the day. “

While many dealers are still making net profits on tight inventories, the dramatic drop in sales volumes will likely affect the profits of automakers in the third quarter. GM had already signaled this in August with an outlook for the full year that disappointed investors.

“I don’t think that means everyone is going to start losing money right away,” Stoddard said. “But if it doesn’t start to improve next year, it will start to catch up with them.”

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