While not all automakers have finalized their sales results for the first half yet, the direction for the industry is clear: The sales frenzy that fueled the market through the spring has clearly passed.
June new-vehicle sales appear to be coming in below our initial forecast, and we expect limited supply is the cause. Inventory has been tight in 2021 compared to historical levels, and the industry has been able to thrive, but that period may now be over. The third quarter will be the industry’s toughest in 2021, and our analysts are forecasting second-half sales to finish below first half. Demand is there. Inventory isn’t.
Members of the Cox Automotive Industry Insights team recently offered commentary on first-half performance for new-vehicle sales:
Jonathan Smoke, chief economist, Cox Automotive: “Tight supply conditions have enabled strong pricing power, and pricing power has boosted margins and contributed to record profitability at the dealership level. COVID-19 as a factor holding back business has faded; as far as retail auto sales go, the pandemic is in the review mirror. Dealers are focused principally on one problem: inventory. But as the adage goes, be careful what you wish for!”
“The second quarter has been truly remarkable, certainly leaving the industry in strong financial shape. The sales frenzy is over, but we’re settling into a more normal and predictable pattern of strong demand that should grow into the future.”
Charlie Chesbrough, senior economist, Cox Automotive: “Given the strength of the first half, we’ve adjusted our sales forecast for the U.S. market up to 16.5 million for 2021. We started the year more pessimistic, expecting supply issues to hold back sales further, but the automakers and dealers, in general, have been able to maintain remarkably strong sales in the face of lean inventories.”
“We expect the second half to be constrained, and even though there will be strong demand from consumers, they can’t buy what isn’t there. How long the supply crunch will last is difficult to estimate since the issue varies greatly across product lines and geography, but certainly the next few months will be revealing.”
Michelle Krebs, executive analyst, Cox Automotive: “The progress is slow but also undeniable: Electrified vehicles, mostly hybrids, gained further traction in June and the second quarter. At this point, nearly 25% of Toyota products are electrified in some way, mostly hybrids. Other makes are seeing continued year-over-year growth in electrified vehicles, EVs and hybrids combined, and the industry is approaching the milestone of 10% electrified. EVs and hybrids still carry more incentives than gas-powered vehicles, plus many still qualify for healthy government and state incentives, but the numbers confirm: More Americans are steering toward electrified vehicles and the industry has likely passed the point of peak gas-powered mobility.”
Kayla Reynolds, industry intelligence analyst, Cox Automotive: “High prices are keeping some buyers away from the market altogether, but the used-vehicle market is benefitting from buyers who are unable to find what they want in the new market, where inventory is even tighter.”
Brian Moody, executive editor, Autotrader: “Consumers looking to buy a new car in the next few months should be prepared to pay the full retail price. With limited supply of both new and used vehicles, great deals are few and far between.”
Related news: Tight Supply + High Prices = Slower Vehicle Sales