New normal: Car sales unlikely to peak before pandemic anytime soon | Business

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Detroit News

DETROIT – With automakers only expecting to sell about as many vehicles in 2021 as in the last few years of the Great Recession and with supply issues still hampering production, the U.S. auto industry is unlikely to see of recent sales before the pandemic in the near future.

Forecasters predict 2021 will end with around 15 million vehicle sales or slightly less when automakers release figures for the year and the fourth quarter next week. That would be an increase from 14.7 million in 2020, but well below the tally of over 17 million in 2019 and even below the nearly 15.4 million in 2012.

The culprit: a global shortage of microchips that crippled production even as demand pushed average transaction prices to record highs.

General Motors Co. and Stellantis NV to publish sales on Tuesday; Ford Motor Co. will share its figures on Wednesday.

Customers like Silas Williams of Macomb Township, Mich., Have postponed securing new leases into 2021 as they saw prices rise and supply decrease on dealer lots. Instead of renting a new Dodge Durango SUV like Williams and his wife, Leenet Campbell-Williams, do every few years, the couple opted to buy their lease instead, which cut their payment in half. They now have a 2018 Durango which is worth more than Silas expected.

“We plan to keep the vehicle, and maybe, I don’t know, my wife could later in 2022, she could look to get another vehicle,” he said. “We’ll see what the landscape is. “

Analysts expect sales to increase slightly in 2022: estimates range from 15.2 million to 15.8 million. These include the expectation that automakers have earned their place to secure the necessary semiconductors that power on-board electronics like automated driving functions, infotainment systems and heated seats, and that the pandemic of COVID-19 does not lead to more production or demand. disturbances.

Edmunds.com Inc.’s projection is rather weak with 15.2 million in sales.

“Every part in inventory is going to be sold or has already been sold,” said Ivan Drury, senior director of information at the Vehicle Information website. “It really comes down to: what do we think automakers can produce? “

The chip shortage alone is expected to cost the production of 7.7 million vehicles worldwide and $ 210 billion in lost revenue in 2021, according to the latest forecast from global consulting firm AlixPartners LLP.

But Dan Hearsch, general manager of the automotive and manufacturing practice of AlixPartners, said the chip shortage situation is improving overall.

“The problems that keep hitting us are really less with the chips, I mean, certainly, the chips here and there, but it’s the labor, it’s the steel, it’s the pieces glued on. a boat in California, ”he said.

Automakers say visibility into the microchip shortage deep in their supply chains isn’t great, even nearly a year after they started running out of parts.

They expect the problems to persist through 2022, although they had fewer fourth-quarter plant closures in North America. Stellantis cites weak demand for production stoppages at some of its factories in January, not chips.

Some estimates place annual vehicle demand at 17 million or even 18 million, says Michelle Krebs, executive analyst at Cox Automotive. That’s because Americans have more in their wallets due to the federal COVID-19 stimulus, reluctance to use public transit and carpooling, and increasing household savings as the pandemic continues. limited leisure activities.

This demand, however, comes as automakers and their retailers reap the benefits of low supply, vehicle orders, and customers willing to pay above the manufacturer’s suggested retail price. In November, the average MSRP was $ 662 lower than the average transaction price of $ 45,872, which was up 15% year-over-year.

AutoForecast Solutions LLC does not forecast auto sales to exceed 17 million by 2028, said Sam Fiorani, vice president of global forecasting. It highlights the slow transition from internal combustion engine vehicles to electric vehicles, which accounted for 3% of US sales in 2021; Edmunds predicts that the electric vehicle market share could reach 4% next year.

“People who love their ICE vehicles will find the replacement expensive, as emission regulations and electric vehicle competition drive up the price,” Fiorani said. “There will be fewer buyers for these, and in turn, fewer buyers compared to the current level of electric vehicles. We will see more and more older internal combustion engines as the age of vehicles continues to increase.

This prediction, he noted, is, however, based on the industry’s new sales direction which emphasizes customer orders and reducing dealer inventory: “If dealers and manufacturers get together. arguing for volume again, we can see that number increase dramatically. “

For now, supply is improving from record lows. The inventory of new vehicles stood at nearly one million vehicles at the end of November, the highest level since the beginning of August but still down 64% from 2020, according to Cox Automotive. The inventory of unsold new vehicles reached 1 million as of Dec. 6, Krebs said.

“We think things are going to get better, but stocks are always going to be low because we have a pipeline that needs to be filled, and it’s very low right now,” she said.

“It’s kind of a stabilization; it doesn’t get worse.

Sales started strong in 2021, but as the chip shortage compounded production losses, there were simply no vehicles left for sale. “It’s the worst six months we’ve seen in a decade in terms of falling sales, not demand, but sales,” Krebs said.

Prior to Christmas Eve, dealer Jeff Laethem only had seven field vehicles for sale at his Ray Laethem Buick GMC dealership on Mack Avenue in Detroit. Before the pandemic, it would have had more than 400. The Chrysler Dodge Jeep Ram dealer in Laethem in the street is doing a little better, with 130 vehicles on the ground. Before, he would have had 500-600.

“Something has to give,” Laethem said.

“It is becoming more and more difficult to do operationally. There was a time when we were selling enough vehicles before it got really low like now, where we could be quite profitable even selling fewer cars because we didn’t have any of the expenses to keep the cars on the ground. , but now that we’re coming back to next to nothing, there’s not much profit to make up for it.

December, typically one of the busiest selling months of the year, was hit due to the shortage. New vehicle sales for December are estimated at 1.2 million, down 21% from December 2020, according to a joint forecast from JD Power and LMC Automotive. Fourth-quarter JD Power and LMC project sales to reach 3.3 million, down 20% year-on-year, even as full-year sales are expected to increase 4% .

“While the inventory situation has improved slightly since November, supply remains well below the level at which consumer demand for new vehicles can be met,” said Thomas King, president of the data and analytics division. at JD Power, in a press release. “The intense demand with this limited supply leads to a continuous increase in prices. “

Bess Wills, part owner and general manager of Gresham Ford in eastern Oregon, points out the positives for customers: They can order exactly what they want from a vehicle and the dealership will honor the incentives in effect at the order date or delivery date, giving buyers whatever the lowest price.

“Trucks are coming in every day and two-thirds are orders already sold,” said Wills, noting that she is lucky to have 25 cars on her lot compared to the more typical 120-150. “Over 50% of our retail sales this month are orders. I know we will continue to try to do this. So as long as we can keep people interested and have a chance to wait.

That’s not a problem right now, she said, with products like the new Bronco SUV and the upcoming all-electric Lightning F-150 truck, for which she has 100 reservations.

High prices have not slowed down demand. Dealers say they sell vehicles before they arrive.

As of December 23, Jim Ellis Chevrolet in Atlanta had more than 80 vehicles in transit to the dealership, but those had been on hold for months awaiting parts. In the field, the lot has around 30 vehicles for sale, said managing director Ralph Sorrentino.

Sorrentino doesn’t expect the situation to improve much until maybe summer, and that is if “we don’t have more news on the radar by then”.

“Demand is still record high,” he said. “People want to post bonds, they want yesterday’s cars. Everyone wants a new car. It’s kind of a good place to be in for a little bit.

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