Car production wild card for 2022 as dealer lots remain scarce

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Cars and trucks are rolling off assembly lines a little faster as automakers find workarounds to address semiconductor shortages, but dealership lots will likely continue to suffer from empty nest syndrome for many years to come. years to come. months, according to a number of industry reports.

Add to that the likelihood of autoload interest rates rising, and it’s no relief to buyers looking for a wide selection, or most new vehicles, at affordable prices. . Indeed, if a driver’s ride is still usable, it may be wise to sit back in 2022 and wait for stocks to rebound and prices to retreat out of reach for many, simply expensive.

What’s frustrating for automakers and dealerships is that there simply aren’t enough cars and trucks available to meet very high demand. In 2021, sales of new vehicles amounted to just under 15 million units. This is around 2 million less than in 2019 before the start of the Covid-19 pandemic.

It’s not for lack of consumer interest.

“Demand is still strong in the market and we could see sales in the range of 17 million units (for 2022). So most likely, if vehicle production resumes, we will see a recovery in sales before the inventory recovery,” said Kevin Roberts, director of analytics and industry insights for car shopping and research site CarGurus.com.

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in an interview.

According to the National Auto Dealers Association, inventory levels at the end of December 2021 stood at 1.12 million units, up 7.4% from the end of November 2021, but down 59.1% from report to report total of 2.75 million units as of end of December 2020

An analysis from Cox Automotive framed the inventory shortfall in terms of days of supply on dealer lots or in transit – 60 days at the start of 2021 shrinking to less than 40 by New Year’s Eve.

However, as automakers try to find new sources of semiconductor chips and figure out how to overcome an overall supply chain slowdown, production is slowly increasing. But getting back to traditional levels will be a tenuous journey according to Charlie Chesbrough, senior economist at Cox Automotive.

“If dealer supply is slow to recover and only grows at a rate of 1% to 2% each month throughout the year…then the market is heading for a worse year than 2021,” Chesbrough said during an online press briefing. “If the supply rebuilds faster, the monthly gains of 3% or 4% throughout the year…we’ll have a much better year.”

CarGurus’ Kevin Roberts predicts slow but steady improvement, offering “It’s going to be more impacted in Q1, it’s going to get better in Q2, get better in Q3.” A lot of the projections I’ve seen, in the fourth quarter we should be back to full vehicle production.

It may happen but no one is predicting a return this year to a sales volume of 17 million vehicles. Roberts is looking at 15 to 16 million while Cox’s chief economist, Jonathan Smoke, is even settling at 16 million. NADA chief economist Patrick Manzi sees a market of 15.4 million.

For consumers who have already found the brass ring attached to a new car or truck elusive, they shouldn’t expect it to get any easier to grab this year.

“As long as inventories remain tight, I don’t think we’ll see incentive prices move that much,” Roberts said.

Indeed, it would seem that the rules of the game are tilting in favor of one side of the sales equation.

“With the economy doing well, unemployment and interest rates low and available inventory tight, the market is currently owned by sellers,” Chesbrough said. “As a result, vehicle buyers looking for bargains will be challenged. Tight inventories have allowed manufacturers to forgo discounts.

Good for car manufacturers. Historically high transaction prices breaching the $47,000 barrier due to sales of high-vignette pickup trucks and SUVs actually boosted earnings despite declining overall sales.

According to Chesbrough, total automaker revenues were higher in 2021 than in 2020 by nearly $70 billion and, more surprisingly, higher than in 2019 by nearly $2 billion. This is with nearly 2 million fewer vehicles sold.

The used-vehicle lot was traditionally plan B for consumers who found the price of a new car or truck out of reach, but prices soared during the pandemic when the shortage of trade-ins resulted in low stocks.

There is evidence that 2022 will see some relief for these buyers according to Roberts who noted “as new vehicle production resumes, used sales will likely stay where they are, but prices will start to come down at this point. Historical demand for used vehicles is strong in the first quarter and then begins to experience a seasonal decline in the second quarter,” which he says typically leads to lower prices.

Ultimately, buyers can win the war despite some automakers’ decision to place an order and then build a model, limiting the number of vehicles languishing on dealer lots and avoiding the need for rich incentives. to move the metal.

“Automotive is a very competitive industry and it’s just as likely that the desire for sales growth and increased market share is just too strong,” Chesbrough said. “Like a moth on the flame, this will lead some OEMs (car manufacturers) to increase supply and increase discounts, which could force everyone to follow suit. Old habits are hard to break.

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