New-Car Supply Is Low, And Demand Remains High

Expect U.S. auto sales in April to fall around 20% vs. April 2021, due to low new-vehicle production, according to a couple of prominent forecasters.

In turn, analysts blame a computer chip shortage and other supply-chain problems for low new-vehicle inventory at dealerships.

According to the latest estimate from AutoForecast Solutions, the computer chip shortage could reduce North American auto production by more than 200,000 units this year.

Since January 2021, the chip shortage has cost North American auto production around 2.3 million cars and trucks, and potentially nearly 3.5 million, if lost production can’t be made up. AutoForecast Solutions is based in Chester Springs, Pa.

Record-high prices are the predictable result of low supply and high demand.

According to the online auto shopping site TrueCar Inc., the estimated average transaction price in April 2022 is $43,755, based on partial results for the month, up 14.7% vs. a year ago.

Also predictably, automakers have cut incentives. TrueCar said incentives as a percent of average transaction price were an estimated 3.4% in April, down from 8.5% a year ago.

In a forecast that was published April 27, TrueCar expects U.S. auto sales of about 1.2 million in April, down 21% vs. a year ago. In a separate forecast the same day, J.D. Power and LMC Automotive predicted similar numbers for April auto sales.

The April 2022 U.S. auto sales forecast looks worse, in contrast to a strong year-ago month in relative terms, before the chip shortage fully took hold, said Thomas King, president of the data and analytics division at J.D. Power.

Last year, dealerships had nearly 1.7 million cars and truck in inventory to sell, vs. fewer than 900,000 units in April 2022, King said.

David Smith, CEO of Sonic Automotive, Charlotte, N.C., said new-vehicle demand remains strong.

“Despite inventory constraints and inflation due to ongoing supply chain issues, we continue to see solid consumer demand for vehicle sales and parts and services throughout our business,” he said, in a conference call April 28.