The pandemic continues to challenge car sales

Car sales continue to be affected by reduced inventory.

New vehicle sales were stuck again in December, paving the way for what could be a bumpy ride in 2022. The auto industry is still haunted by COVID-19, causing shortages of key materials essential to the growing automotive market. electric vehicles.

This is the joint forecast issued by JD Power and LMC Automotive. The companies estimate that US auto retail sales in December 2021 will decline 17.4% to 1.105 million units from December 2020 after adjusting the number of sales days. Without the adjustment, sales were down 20.4% year-on-year.

Lean inventory drives sales down

U.S. sales for 2021 are expected to total nearly 13 million units, some 3.5 million units below the 2020 total.

“Summary, tight inventory continues to control the industry,” according to a statement from Cox Automotive. “Sales in December are expected to decline more than 30% year-over-year, and auto sales in 2021 will end below $ 15 million for the second year in a row.”

A similar joint estimate from JD Power and LMC Automotive projects seasonally adjusted new vehicle sales of 13 million units for 2021, down 3.5 million units from 2020.

Inventories are increasing, but so are prices

But December brought good news and bad news.

Inventories are improving, but not enough to meet consumer demand.

“Retail inventories are showing some improvement, reaching just over one million units for the first time since July, and retail transaction prices and profits have reached record levels,” said Thomas King, president from the Data and Analytics Division at JD Power, in a statement.

But new vehicles don’t stay on dealer lots for long, according to King.

“In December, a record nearly 57% of vehicles will be sold within 10 days of arriving at a dealership, while the average number of days a new vehicle sits on dealership land before being sold is on the way to 17 days. a record compared to 49 days a year ago.

King says that even as stocks improve, they remain well below levels at which consumer demand can be met. This leads to an expected record average transaction price of $ 45,743, the first time above $ 45,000 and 20% higher than in December 2020.

Automakers are responding to declining inventories by reducing incentives.

OEMs respond by reducing incentives

The higher prices are exacerbated by the manufacturer’s reduced incentives for vehicles, which are expected to fall to an average of $ 1,598 per vehicle in December 2021, from $ 2,291 a year ago. This is due to the lack of vehicles on the ground. With less to sell, there is less need for incentives to move the metal.

Still, the overall supply will remain limited next year as the semiconductor supply chain remains problematic, according to IHS Markit analysts.

Virus continues to haunt sales prospects

COVID-19 is expected to continue to control the fortunes of the industry in 2022.

Looking ahead, IHS Markit forecasts new light vehicle sales of nearly 82.4 million worldwide in 2022, up 3.7%, with sales continuing to recover in most regions, according to IHS. This assumes the continued availability of effective vaccines and the absence of major impacts from the Omicron variant.

Nonetheless, the decline in vehicle production is expected to have an impact on depleted stocks for some time, thus delaying the fulfillment of existing orders.

“The trajectory of the pandemic remains an important driver of the automotive demand cycle in 2022, in particular the ‘race’ between the vaccine and the variants. Concerns remain as winter arrives for countries in the northern hemisphere, and the emergence of the Omicron variant represents a worrying development, ”said Colin Couchman, executive director, global light vehicle forecasting, IHS Markit.

What is expected in 2022

Retail sales in the United States are expected to rebound to more than 15 million units in 2022.

In 2022, IHS analysts estimate US sales volumes to reach nearly 15.5 million units, up about 2.6% from their 2021 forecast level of around 15.1 million units.

“For 2022, the pace of sales should accelerate in the second half of the year. Given current inventory conditions, it is difficult to predict a significant recovery in demand in the first half of 2022. But we do expect to exit 2022 with a more recognizable sales pace at pre-COVID levels, paving the way for more. better volume outlook in 2023 and 2024, ”said Chris Hopson, director of North American light vehicle sales forecasts, IHS Markit.