With automakers only expecting to sell about as many vehicles in 2021 as they did in the waning years of the Great Recession and supply issues still hampering production, the U.S. auto industry likely won't see recent pre-pandemic sales in the near future.
Forecasters expect 2021 will finish with about 15 million vehicle sales or slightly fewer when automakers report full-year and fourth-quarter figures next week. That would be up from 14.7 million in 2020 but well shy of 2019's tally of more than 17 million, and below even 2012's nearly 15.4 million.
The culprit: a global microchip shortage that crippled production even while demand increased average transaction prices to record highs.
General Motors Co. and Stellantis NV will report sales Tuesday; Ford Motor Co. will share its figures Wednesday.
Customers like Silas Williams of Macomb Township, Michigan, put off getting new leases in 2021 as they watched prices rise and supply dwindle on dealership lots. Instead of leasing a new Dodge Durango SUV like Williams and his wife, Leenet Campbell-Williams, do every few years, the couple opted instead to purchase their lease, which cut their payment in half. They now have a 2018 Durango that's valued higher than Silas expected.
"We plan on keeping the vehicle, and maybe, I don't know, my wife might later in 2022, she might look to get another vehicle," he said. "We'll see what the landscape is."
Analysts expect slightly increased sales in 2022: Estimates range from 15.2 million to 15.8 million. Those include the expectation that automakers have acquired their place in line to get the needed semiconductors that power in-vehicle electronics like automated driving functions, infotainment systems and heated seats, and that the COVID-19 pandemic doesn't lead to more production or demand disruptions.
Edmunds.com Inc.'s projection is on the low side at 15.2 million sales.
"Every single piece of inventory is going to be sold or already has been," said Ivan Drury, senior manager of insights at the vehicle information website. "It really comes down to: What do we think the automakers can produce?"
The chip shortage alone was expected to cost production of 7.7 million vehicles globally and $210 billion in lost revenues in 2021, according to the latest forecast from global consulting firm AlixPartners LLP.
But Dan Hearsch, a managing director in AlixPartners' automotive and industrial practice, said the chip shortage situation is improving overall.
"The issues that continue to hit us are really less about chips, I mean, certainly, here and there chips, but it's labor, it's steel, it's parts stuck on a boat in California," he said.
The car companies say visibility into the microchip shortage located deep in their supply chains isn't great even nearly a year after they began running into a scarcity of parts. They expect problems to persist well into 2022, though they had fewer plant shutdowns in the fourth quarter in North America. Stellantis is citing slack demand for production halts at some of its plants 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 as Americans have more in their pocketbooks because of federal COVID-19 relief stimulus, hesitation to use public transportation and ride-sharing, and increased household savings as the pandemic limited leisure activities.
That demand, however, comes as automakers and their retailers are reaping 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 less than the $45,872 average transaction price, which was up 15% year-over-year.
AutoForecast Solutions LLC doesn't predict auto sales will surpass 17 million through 2028, said Sam Fiorani, vice president of global forecasting. He points to the slow transition from internal combustion engine vehicles to electrics, which made up 3% of U.S. sales in 2021; Edmunds predicts EVs' market share could be 4% next year.
"People who like their ICE vehicles will find the replacement to be expensive as emissions regulations and competition from EVs push up the price," Fiorani said. "There will be fewer buyers for those, and in turn, fewer buyers relative to the current level of EVs. We'll see more and more older internal combustion engines as the age of the vehicles continue to increase."
That prediction, he noted, however, is based on the industry's new sales direction that emphasizes customer orders and keeping dealer stocks lighter: "If dealers and manufacturers compete for volume again, we can see that number dramatically increase."
For now, supply is improving from record lows. New vehicle inventory was at nearly 1 million vehicles at the end of November, the highest level since early August but still down 64% from 2020, according to Cox Automotive. Unsold new vehicle inventory hit 1 million as of Dec. 6, Krebs said.
"We do think things will get better, but inventory is still going to be low because we've got a pipeline that needs to be filled, and that's very low right now," she said. "It's sort of stabilizing; it's not getting worse."
Sales started strong in 2021, but as the chip shortage deepened production losses, there just weren't vehicles to sell. "It's the worst last six months that we've seen in a decade in terms of lower sales, not demand, but lower sales," Krebs said.
Before Christmas Eve, dealer Jeff Laethem only had seven vehicles on the lot to sell at his Ray Laethem Buick GMC dealership on Mack Avenue in Detroit. Pre-pandemic, he would've had upward of 400. Laethem's Chrysler Dodge Jeep Ram dealership up the street is faring a bit better, with 130 vehicles on the lot. Before, he would have had 500-600.
"Something's got to give," Laethem said. "It's becoming operationally tighter to do. There's a point where we were selling enough vehicles before it got really low like it is now, where we could be pretty profitable even selling less cars because of not having any of the expenses of keeping the cars on the ground, but now that we're getting down to next to nothing, there's not that much profit to make up for it."
December, typically one of the busiest selling months of the year, took a hit because of the short supply. New-vehicle sales for December are estimated to come in at 1.2 million, a 21% decrease from December 2020, according to a joint forecast from J.D. Power and LMC Automotive. J.D. Power and LMC project fourth-quarter sales will hit 3.3 million, a 20% decrease year-over-year even as sales for the whole year are expected to be up 4%.
"While the inventory situation has improved modestly 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 J.D. Power, in a statement. "Intense demand with this limited supply is resulting in prices continuing to increase."
Bess Wills, co-owner and general manager of Gresham Ford in eastern Oregon, emphasizes the positives for customers: They can order exactly what they want from a vehicle and the dealership will honor incentives in effect on the order date or the delivery date, giving buyers whichever price is lower.
"Trucks come every day, and two-thirds are already-sold orders," said Wills, noting she's lucky to have 25 cars on her lot compared with the more typical 120-150. "More than 50% of our retail sales this month are orders. I know we're going to continue to try doing it. So as long as we can keep people interested, and they have the ability to wait."
That's not a problem for now, she said, with products like the new Bronco SUV and the forthcoming all-electric F-150 Lightning truck, for which she has 100 reservations.
The high prices haven't slowed demand. Dealers say they are selling vehicles before they arrive.
On Dec. 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. On the ground, the lot has about 30 vehicles to sell, general manager Ralph Sorrentino said.
Sorrentino doesn't expect the situation to get much better until maybe summer, and that's if "we don't have any other blips in the radar between now and then."
"The demand is still record high," he said. "People want to put deposits, they want the cars yesterday. Everybody wants a new car. It's kind of a good spot to be in a little bit."
