Despite chip shortage, April auto sales expected to set records
Despite hundreds of thousands of lost units of production from a global semiconductor shortage, U.S. auto retail sales are expected to reach record highs for April, but only time will tell when depressed inventories will disrupt those volumes.
The forecast is the latest from market research firms J.D. Power and LMC Automotive. The report says the continuing demand has lessened the need for incentives and increased transaction prices and profits, demonstrating consumers' willingness to pay more and to buy pricier vehicles. The April forecast represents a seasonally adjusted annual rate of 18.1 million U.S. sales — more than the peak 17.5 million vehicles sold in 2016.
"With the sales pace exceeding the rate at which vehicles are being produced, compounded by significant production disruption due to the microchip shortages, there is a growing risk to the industry's ability to sustain the current sales pace in the coming months," Thomas King, president of the data and analytics division at J.D. Power, said in a statement.
Relief isn't expected until the second half of the year. Stellantis NV on Wednesday said it is extending downtime at three North American plants due to the global semiconductor shortage. Belvidere Assembly Plant in Illinois making Jeep Cherokee SUVs, Windsor Assembly Plant in Ontario making Chrysler minivans and Toluca Assembly Plant in Mexico making Jeep Compass SUVs will be down through the first week of May.
"Stellantis continues to work closely with our suppliers to mitigate the manufacturing impacts caused by the various supply chain issues facing our industry," spokeswoman Kaileen Connelly said in a statement.
As of Monday, the automaker had lost an estimated nearly 158,000 vehicles across eight plants in North America, according to AutoForecast Solutions LLC. Windsor has lost nearly 33,000 vehicles, Belvidere has lost more than 25,000 and Toluca has lost more than 42,000.
Meanwhile, production of the Ram 1500 Classic pickup truck remains down at Warren Truck Assembly Plant through the end of May and crews have been cut at the Jefferson North Assembly Plant, which builds the Jeep Grand Cherokee and Dodge Durango SUVs, into June.
General Motors Co. this week did say it will resume production at Lansing Grand River Assembly on Monday after the plant that makes the Cadillac CT4 and Cadillac CT5 luxury cars and Chevrolet Camaro sports car began idling on March 15. It lost more than 11,000 produced vehicles, according to AutoForecast Solutions. GM is down more than 197,000 vehicles in total in North America. Ford Motor Co. has lost more than 229,000 vehicles.
For now, though, low inventories have lessened the need for incentives and showed consumers' willingness to pay higher prices for new vehicles, King said. The average transaction price of $35,572 would be the second-highest on record behind December, according to the J.D. Power and LMC forecast. Retailer profit per vehicle is on pace to reach $2,697, more than double a year ago. Nearly a third of vehicles are being sold within 10 days of hitting dealer lots.
"With inventory levels materially lower than they were at the start of April, the risk of inventory related sales disruption is increasing," King said. "But April did demonstrate that lower than normal inventories were still sufficient to deliver record sales volumes. Whether inventory levels will finally fall in May to the point where aggregate industry sales are disrupted is unclear."