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US Auto Sales Expected To See Substantial Rise In March Despite Chip Shortage

US Auto Sales Expected To See Substantial Rise In March Despite Chip Shortage

U.S. auto sales are expected to rise in March, despite brutal weather conditions and semiconductor chip shortages that have forced automakers to cut production, auto industry consultants J.D. Power and LMC automotive forecast on Friday.

What Happened: Retail sales of new vehicles are estimated to reach 1,288,100 units, a 70.7% increase compared with March 2020, and a 9.2% increase compared with March 2019, when adjusted for selling days, the consultancies said. On a sequential basis, that is compared to the previous month, the retail sales of new vehicles are expected to rise about 32%. 

To put it in context, the effect of the COVID-19 pandemic and state lockdowns had just started to be seen in March last year forcing the industry experts to revise the retail sales targets significantly lower, implying a lower base, as reported by Reuters at the time.

On a quarterly basis, the retail sales of new vehicles are forecast to jump 20.5% to 3,160,500 from a year ago, and a 4.7% increase from the first quarter of 2019.

The consultancies said that the ongoing global chip shortage is forcing automakers, who are experiencing supply chain challenges to build their most profitable models first so as to minimize the net effects. Despite limited inventories, consumers are showing a willingness to buy, the report said.

The chip shortage has impacted automakers across the globe, including Ford Motor Company (NYSE: F), Tesla Inc. (NASDAQ: TSLA), and Nio Inc. (NYSE: NIO).

See Also: How Hyundai Avoided The Chip Shortage Plaguing Tesla, Other Automakers

“The strong first-quarter sales performance is despite lean inventories and ongoing disruption to vehicle production. Inventories have been sufficient to meet consumer demand and delivered the opportunity for manufacturers and retailers to sell those vehicles with smaller discounts,” said Thomas King, president of the data and analytics division at J.D. Power.

Both retailers and manufacturers are expected to deliver record profits, according to the forecast. The average price of a new vehicle is forecast to rise 7.5% to  $37,286 during the month and is also the highest ever for the month of March.

“While the slow recovery of fleet sales, coupled with production disruption due to supply chain issues will be a headwind to overall profitability for some manufacturers, the aggregate industry profit performance will be extremely strong.”

Why It Matters: A combination of factors including tighter inventory, lower interest rates, disciplined dealer incentives and discounting, in addition to shifting consumer preference for more expensive and profitable trucks and SUVs, are driving prices higher.

Most U.S. automakers including General Motors Co (NYSE: GM) and Ford are due to report first-quarter sales volume in early April.


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