Big Business /

U.S. Auto Sales Continue to Decline

The auto industry has suffered a serious of set backs because of an ongoing worldwide shortage of semiconductor chips

Auto sales have declined nationally as supply chain shortages continue to impact the industry.

Ford Motors reported that new vehicles sales declined by 33% from a year earlier. The company says that the global shortage of semiconductor chips is the main challenge facing their production. Ford’s sales peaked in April of this year, reaching over 18 million vehicles. This month, the company reported an adjusted selling rate of about 13 million.

The sales pace is an indicator of the industry’s health. It measures how many cars a company would sell in a year if it maintained the same monthly sales rate.

“Analysts expected the August selling pace to be between 13.1 million and 14.4 million vehicles, with J.D. Power and LMC Automotive forecasting overall sales to decline by 13.7% compared with August 2020,” reports CNBC.

August is typically a higher sales month for cars. However, the lack of chips caused a spike in new car prices as well as a limited inventory.

Before the coronavirus pandemic, dealerships had on average roughly 3 million cars in inventory for retail sale. Thomas King, president of the data and analytics division at J.D. Power, says that number has plummeted to 942,000.

“Although inventory is arriving at dealers daily, it is simply replacing the vehicles being sold, preventing dealers from increasing inventories to a level necessary to support a higher sales pace,” King said to CNBC.

Similarly, Sweden-based Volvo warned this week that its sales during the second half of the year were likely to decline. 

Volvo Cars said supplier shut-downs since mid-July — due to local efforts to limit the spread of the highly contagious Delta variant in South-East Asia — had worsened an already strained supply situation, forcing it to halt production,” per Reuters

Honda and Toyota also had to shut down production in Asia, halting production temporarily over the summer.

The Goldman Sachs report says new car prices will likely continue to rise over the next few months, peaking around 6% above their pre-pandemic level toward the end of the year,” says CNN Business. “However, prices are expected to retrace about 30% of their pandemic-era increase by the end of 2022.”

Shortages and high prices of new cars have, in turn, caused a higher price for used cars.

*For corrections please email [email protected]*