A customer looks at a General Motors Co. Chevrolet vehicle on sale at a Colma, Calif. Car dealership on Monday, February 8, 2021.
David Paul Morris | Bloomberg | Getty Images
DETROIT – Automakers report strong vehicle sales driven by consumer demand in the first quarter as fleet sales struggled and a persistent shortage of semiconductor chips closed some assembly plants.
Analysts were forecasting an increase in sales across the industry of about 8% or 9% compared to the first quarter of 2020 when Covid-19 began forcing dealers and auto plants to close in March. But many automakers are exceeding these forecasts despite the difficult circumstances.
Automakers less reliant on fleet sales to corporate and government customers in the US saw better sales in the first quarter. Detroit automakers saw sales improve single-digit compared to Q1 2020, while domestic automakers saw significant gains.
These include: Volkswagen, up 21%; Toyota Motor, up 21.6%; Hyundai Motor, up 28%; and Kia Motors by 22.8%. Stellantis – the merged automaker of Fiat Chrysler and France-based Groupe PSA – saw sales grow 5.1%, including a 25% increase in retail sales. Ford Motor announced that first quarter sales were up 1%. General Motors sales increased 3.9%.
“The gains are a little more modest for the domestic automakers,” Jessica Caldwell, Executive Director of Insights at Edmunds.com, told CNBC. “It looks like they are really affected that the fleet opportunity is not available due to limited inventory.”
According to GM, retail sales to individual consumers rose 19% in the first quarter, while fleet sales to corporate and government customers declined 35% year over year. The automaker expects consumer demand to remain stable this year.
“Consumer confidence and spending will continue to rise due to incentives, rising vaccination rates and the gradual reopening of the economy,” said Elaine Buckberg, GM’s chief economist, in a press release. “Demand for automobiles should remain strong all year round.”
Semiconductor shortage
Automakers and suppliers warned of a semiconductor shortage late last year after vehicle demand rose faster than expected following a two-month shutdown of production facilities last spring due to the coronavirus pandemic.
Among other things, semiconductor chips are extremely important components of new vehicles for infotainment systems, power steering and brakes. The parts can contain different sizes and different types of chips.
“This chip shortage affects everyone. We are no exception,” said Jose Munoz, CEO of Hyundai North America, on CNBC’s “Squawk on the Street” on Thursday. “We hope that the situation will improve in the next four to five months, maybe a recovery in the third and fourth quarters. But for now we have to be very careful and try to optimize ourselves as we have done so far.”
Hyundai has been less affected by the chip shortage than others such as the Detroit automakers, each of which has announced significant production cuts for domestic plants.
Most recently, Ford announced plans on Wednesday to cut production at six plants in North America due to the problem, including plants that make highly profitable vans.
Consulting firm AlixPartners estimates the chip shortage will reduce global auto industry sales by $ 60.6 billion this year.
Tight stocks
Production cuts due to the chip shortage have resulted in lower vehicle inventories, which were already tight for many popular models due to operational shutdowns last spring to reduce the spread of Covid-19.
Edmunds estimates that the number of new vehicles sold at dealerships nationwide was down 36% last month from a year earlier.
“The inventory problem doesn’t seem to be resolving anytime soon,” said Caldwell. “All of this will have an impact on sales later in the year,” said Caldwell. “If it’s May, July, August, they’re all volume months. If this inventory isn’t necessarily there, it’ll hurt.”
For now, tighter stocks of popular models like pickups and SUVs have led to rising new vehicle prices. Edmunds predicts the average transaction price for new vehicles rose to $ 40,563 in March, compared to $ 38,601 a year ago.