The Cupboard Is Getting Bare At Auto Dealerships, Hurting July Auto Sales - Forbes

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New-car and -truck inventories are so thin, the U.S. auto sales rate is expected to fall this month, to the slowest sales rate of the year so far, forecasters said.

Automakers and dealers have been working around a computer chip shortage that has aggravated the inventory shortage. The factories are directing scarce chips exclusively to the hottest-selling vehicles, and dealers are encouraging customers to order vehicles and wait for them to show up at the dealership, instead of buying them as usual, out of dealer stock.

But high consumer demand has overwhelmed the work-arounds — despite sky-high prices and record quarterly profits for many dealerships. Inventories have fallen accordingly.

On July 27, dealership chain Asbury Automotive Group, Duluth, Ga., reported that at times in the second quarter, some of its dealerships had only a five-day supply of new vehicles on hand.

For the whole U.S. auto industry, Cox Automotive said new-vehicle inventory was a record-low 25 days at the beginning of July.

Pre-COVID, the auto industry considered a 60-day supply to be the benchmark. Days-supply is an estimate of how long the current inventory would last at the current sales rate.

With inventory so low, U.S. auto sales for July are expected to be around 1.3 million cars and trucks combined, according to a joint forecast from J.D. Power and LMC Automotive. That would be an increase of 2.7% vs. July 2020, but that’s not saying much, because the year-ago month was hard-hit by the coronavirus pandemic.

Compared with pre-COVID July 2019, the July 2021 forecast is down 8.7%, the forecasters said. Percent comparisons are adjusted for a slightly different number of official “selling days” in the various periods.

The Seasonally Adjusted Annual Rate for July 2021 is a predicted 15 million units, vs. 16.9 million, in July 2019, J.D. Power and LMC said. The SAAR is an estimate of what sales would be for the whole year, at the present monthly sales rate.

Separately, Cox Automotive said it expects a SAAR of 15.2 million for July 2021, based on a slightly higher monthly sales estimate. Sales were also “inventory-constrained” in June 2021, but the July sales rate would be the slowest of the year so far, Cox Automotive said.

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