When Does New-Car Supply Bounce Back? Not In July, Or In 2022, Either

Due mostly to low availability of new cars and trucks, U.S. auto sales in July are on a pace to fall around 6% vs. the same month a year ago.

With little reason to hope for any significant improvement in new-vehicle supplies this year, industry experts are already talking about next year or even the year after, before inventory catches up with demand sufficiently for new-vehicle prices to come back to earth.

“We’re selling everything we have,” said David Hult, president and CEO of Asbury Automotive Group, Duluth, Ga., in a conference call this week to announce second-quarter earnings.

According to a joint forecast from J.D. Power and LMC Automotive, July will be the ninth month in a row new-vehicle retail inventory falls below a total of 900,000 cars and trucks. The forecast predicts July auto sales of about 1.2 million units, down 5.7% vs. a year ago. That’s including sales for daily rentals, corporate and government fleets.

Cox Automotive has a similar but slightly lower forecast for July auto sales, which rounds off to 1.1 million. Atlanta-based Cox Automotive cites “recovery headwinds,” such as rising interest rates, higher gas prices, and lower consumer sentiment in its forecast.

While those are obvious, potential threats, forecasters for both Cox and J.D. Power-LMC agree that tight supply is the No. 1 problem depressing auto sales, and there’s no short-term relief in sight.

Analysts blame the new-vehicle shortage on a shortage of computer chips, but the continuing COVID-19 pandemic is a contributing cause to the chip shortage, as well as other supply-chain bottlenecks.

How low is 900,000 units, anyway? To put the inventory shortage in context: pre-pandemic, new-vehicle inventory averaged around 3.5 million in 2019, according to Cox Automotive.

“We continue to experience solid demand across all of our revenue streams, but we do not anticipate a meaningful recovery in new inventory levels in 2022,” Asbury’s Hult said in the conference call.