The “dreadful” sales figures for August probably won’t get much better through the end of 2021 and into the first half of 2022 because inventory shortages tied to computer-chip scarcity and the rise in coronavirus cases will persist, says Charlie Chesbrough, senior economist for Cox Automotive.
“The concern now is that sales are completely restrained by inventory,” Chesbrough (pictured, below left) says in a Sept. 9 online presentation sponsored by the American International Automobile Dealers Assn.
The seasonally adjusted annual rate for total August light-vehicle sales was just 13.1 million, he says, and it was the fourth month in a row the SAAR declined from the previous month. The SAAR is an estimate of what sales would be for the full year at the current monthly sales pace.
“That really surprised folks,” Chesbrough says of the low August SAAR. He admits Cox Automotive was surprised, too. The firm had predicted a SAAR in the low- to mid-14-million range for August.
According to Motor Intelligence, U.S. light-vehicle sales for August totaled 1,095,521, down 17.2% vs. a year ago. Year to date though August, sales were 10.7 million, up 19.1%. “We don’t expect to remain at those levels the rest of the year,” Chesbrough says.
The SAAR could remain in the 13 million to 14 million range for the next couple of months, he says. In answer to a follow-up question, Chesbrough says the chip shortage could improve some, which might make additional production available later in the fourth quarter, but that’s still a “wild card.”
At the end of the first half, the Cox Automotive 2021 U.S. light-vehicle forecast was 16.5 million units. At the time, it seemed like a conservative forecast, but now that’s looking too optimistic. Through August, the year-to-date light-vehicle SAAR is 16.1 million, Chesbrough says.
Sales could finish the year between 15 million and 16 million, he says, but the most likely scenario is “somewhere in the mid-15s,” he says. Even that would require some sales improvement at year-end.
“The downside threat is significant,” Chesbrough says. “We’re essentially going to sell everything we can produce, if we can get it out there to the marketplace.”
According to Wards Intelligence, U.S. inventories in August came to only 1.06 million units, 58.6% below same-month 2020’s 2.57 million units.
That total replaced July’s 1.12 million units as the lowest in Wards Intelligence’s database history, which begins in 1985. The last time it was lower for any month probably was years, possibly decades, before that.
August days’ supply totaled 24, same as July but below year-ago’s 51. In the five years prior to pandemic-impacted 2020, August days’ supply averaged 63; in fact, in the five years through 2019, August averaged inventory of 3.6 million units and sales volumes of 1.5 million for an inventory-to-sales ratio of 2.4. August 2021’s ratio was 1.01.
Wards Intelligence expects inventory levels to begin rising month-to-month in September, but not enough to create much optimism for the remainder of 2021.
The initial outlook for September’s SAAR is for it to repeat August’s results, which would mean a 13.6 million-unit SAAR in Q3.
– with Haig Stoddard
