July U.S. auto sales are expected to reveal a new-vehicle market that has a large problem – too few products to sell, according to a Cox Automotive report July 27.
The sales pace, which had been averaging nearly 17 million a month through May, is expected to show another decline as falling inventories are halting sales activity around the country.
Cox Automotive forecasts the July sales pace to fall to 15.2 million, down from June’s 15.4 million level. This would be the third consecutive monthly pace decline after hitting a post-COVID-19 peak in April. Sales volume is expected to rise nearly 7.8% over last July, but with 27 selling days this year, one more than last year, that is a minimal gain.
“Sales pace has really been falling throughout the month – and quickly,” said Charlie Chesbrough, senior economist at Cox Automotive, in the news release. “The estimated sales pace of 15.2 million in July is the slowest pace since last August’s 15.1 million, and if inventory levels do not improve, we could see the pace drop even more.”
Inventory levels were tight to start the year after factory closures during the virus outbreak in 2020, but the global chip shortage has decimated vehicle production this year causing available supply to be at a critically low level. To start July, new-vehicle inventory was at a record low 25 days’ supply. A certain amount of supply is necessary for buyers to find the exact vehicle – type, color, trim – they want. Through the spring, inventory levels were extremely low, yet sales kept a strong pace. However, over the last two months, the sales pace has plummeted because of few products. A lack of inventory is expected to constrain sales through August and September but should improve in Q4 as chip orders from manufacturers see more fulfillment.
Demand remains strong in the marketplace supported by improved consumer confidence, a strong stock market, and ongoing economic recovery. For consumers, this low-supply, high-demand situation means finding and buying their next vehicle may be a challenge. Vehicle shoppers may have a hard time finding the exact vehicle they want, in the specific color and trim package desired. And, if they can find a vehicle they want to buy, they may find that the price is non-negotiable as the average transaction price for a new vehicle in June was nearly equal to the manufacturer’s suggested retail price. This combination of hard-to-find vehicles and higher prices is slowing the auto market, which will likely change little over the next few months.
July 2021 New-Vehicle Sales Forecast Highlights
- In July, new light-vehicle sales are forecast to reach 1.33 million units, or nearly 7.8% higher compared to July 2020. When compared to last month, sales are expected to rise over 35,000 units or 2.8%.
- The seasonally adjusted annual rate (SAAR) in July 2021 is estimated to be 15.2 million, above last year’s COVID-19-impacted 14.6 million level but a slight decrease from June’s inventory- constrained 15.4 million pace, and the slowest pace yet in 2021.