New Car Sales Drop as Production Woes Pile Up
Dealers have been struggling to maintain new car inventories for months and it’s starting to really show.
The automotive market has had a rollercoaster year with the pandemic, and its related chip shortages have led to skyrocketing prices in some areas as well as massive production difficulties for automakers. Dealer lots have emptied out across the country as the flow of new cars hasn't been enough to keep up with demand for new vehicles. These events are now reflected in sales figures, with numbers dropping as dealers simply can't sell what they don't have. Car and Driver reports that sales of new vehicles in June were down 14 percent compared to 2019's pre-pandemic figures.
The numbers come from Hearst's in-house Black Book data and analytics team, with the comparison made to 2019 as last year's sales figures were an outlier due to the pandemic. Forbes also note that sales were down in June, though claims a less-drastic 8 percent drop compared to 2019, in line with publicly available figures. Either way, it's a notable decrease against a backdrop of used-car prices which keep going high, high, higher.
Most notably, the data from Black Book suggests that retail listings for new vehicles on sale have dropped precipitously to just 1.2 million in mid-July. This compares to 3.4 million in May 2020, when a glut of inventory remained on dealer lots as sales slowed down last year. Since then, numbers hovered around 2.2 to 2.7 million before starting to drop off in May this year. The numbers are beginning to reflect the situation on the ground, with many dealers across the country facing empty lots with little to no new vehicles on sale.
Despite the drop in new car sales volume, the financial outlook for nationwide dealership chains has been rosy. High demand and limited stock have led to higher prices. CNBC reports that average transaction prices for new vehicles have jumped to $40,206, up from $38,539 in May according to figures from J.D. Power and LMC Automotive. An estimated $149.7 billion was spent on new vehicles by consumers in the second quarter, a full 27.9 percent higher than in 2019. While automakers wrestle with the ongoing production headaches, the higher per-unit profits in the current market help dealers tremendously.
Some models are affected more than others, with Ford's trucks a particularly notable casualty. The Detroit automaker sold just 45,673 F-series pickups last month, making it the worst June result since 2009 in the wake of the global financial crisis. Thousands of trucks have been held in storage lots while waiting for parts. Other automakers are getting creative, with GM dropping features like engine stop-start from some models to get vehicles out the door.
We've been talking about the chip shortage for months now, but it may be the case that the true scope of the problem is only now coming into focus. Naturally, there is some lag between factories halting production and dealers running out of stock. If the problem is as bad as it appears, we should see a further drop in July's sales figures relative to previous years.
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