U.S. August auto sales to fall as supply constraints continue – J.D. Power, LMC Automotive

U.S. auto retail sales are expected to fall in August, as the global semiconductor shortage coupled with the fast spreading Delta variant of the coronavirus squeezed inventory at dealerships, consultants J.D. Power and LMC Automotive said.

Retail sales of new vehicles are expected to fall 14.3% to 987,100 in August from a year earlier, they said in a report released on Thursday.

The chip shortage continues to weigh on manufacturing activity, with automakers cutting production despite strong demand for personal transportation during the COVID-19 crisis.

“Global light vehicle demand remains under pressure from the severe inventory constraints caused by the semiconductor shortage as well as disruption from the COVID-19 Delta variant,” said Jeff Schuster, president of Americas operations and global vehicle forecasts at LMC.

Dealers currently have about 942,000 vehicles in inventory, compared with about 3 million, two years ago, according to the report.

“The industry has insufficient inventory at dealerships to meet strong consumer demand. The consequence is that the retail sales pace is depressed, but transaction prices are elevated.” said Thomas King, president of data and analytics division at J.D. Power.

Average transaction prices are expected to rise 16% to $41,378, partly due to fewer manufacturer incentives.

Tight inventories are unlikely to meaningfully improve in September as ongoing supply chain issues and recent announcements of further production cuts by several manufacturers continue to weigh, the report said.

The consultants lowered their forecast for 2021 global light vehicle sales by 2 million units to 83.8 million units, due to a lack of sufficient production volume.