Chip shortages expected to hit global auto sales for much of 2022

Automotive industry outlook

The global microchip shortage that crimped new-vehicle output last year will continue to pinch volumes in 2022. Even as production schedules improve, automotive inventory is expected to remain tight for much of the coming year after plunging in 2021 to the lowest level since the Great Recession.

U.S. light-vehicle sales are expected to rise slightly in 2022 but remain well below pre-pandemic levels. Once inventory and production normalize, forecasters expect pent-up demand to propel the industry for the next few years.

"It's not greatly different than we saw out of the Great Recession and how many years that carried us," Tyson Jominy, vice president of data and analytics at J.D. Power, told Automotive News. "I think [demand] is stronger by several magnitudes than what we saw even back in 2010 through '13."

Analysts with IHS Markit expect U.S. sales will rise to nearly 15.5 million vehicles in 2022, while Edmunds estimates a more modest 15.2 million. That compares with a projected total of about 15 million in 2021. Most automakers plan to report final results for last year during the first week of January.

With most vehicles selling as they arrive at the dealership, if not before, the actual number will depend largely on how many vehicles automakers can build.

"Throughout most of '22, we do expect to see sort of a one-in, one-out-type basis," Jominy said. "Anything produced in at least the first three quarters is going to go directly to customers, and that will set the sales pace."

In mid-December, dealer Will Churchill had sold out of Cadillacs at his store in Fort Worth, Texas. He expected more vehicles to arrive before the end of the month, but most of them were already reserved for customers. Every Escalade headed to the dealership over the next 90 days was spoken for, he said.

"Right now, we are in a situation where we are selling everything the manufacturer will give us," said Churchill, an owner of Frank Kent Motor Co. "We hope to have a greater volume in 2022 than 2021 strictly because we should get more cars."

Charlie Gilchrist, president of Gilchrist Automotive in Texas, a large market, expects a 10 percent bump in new-vehicle sales this year for his 11-store group. In the weeks before Christmas, Gilchrist was anxiously awaiting deliveries to supplement the 65 vehicles he had on the ground at his largest Ford store, Southwest Ford.

He had been expecting to sell 200 in December, which was already 30 vehicles fewer than a year earlier.

"If those don't hit, then obviously we're not going to make those numbers," he said in mid-December. "I think everybody's in the same boat right now. With the demand as it is, you can sell the vehicles as soon as you can get them."

Production optimism

Toyota Motor North America has a rosier outlook than the forecasting firms.

Jack Hollis, senior vice president of automotive operations, said he expected light-vehicle sales "in the mid-16 million range."

"In terms of the semiconductor supply, we expect challenges to continue through the first quarter of [2022], but supply is improving every day," he said. "As for inventory, we will see a steady increase all year. However, we do not believe we will see 100,000 vehicles on the ground in 2022."

Toyota and Lexus began December — historically one of their biggest sales months of the year — with 116,638 vehicles either at dealerships or in port awaiting shipment.

That represented an 18-day supply of light trucks and a 20-day supply of cars, and about a third what they had in stock a year earlier.

Randall Reed, CEO of eight-store World Class Automotive Group in Texas, which has Ford and Lincoln franchises, expects more inventory in the spring but not pre-crisis amounts.

"We'll never get back to the levels of inventory that we used to stock, and I'm happy about that," Reed said. "I'd much rather have a lower day supply and keep the demand high and the rebates low. It's good for the manufacturer, and it's good for us."

Automakers may be adapting to limited chip supplies, said Mark Fulthorpe, executive director of global light-vehicle production forecasting at IHS Markit. Production has begun to stabilize globally in recent months, and automakers have been experiencing less unscheduled downtime, he said.

"There's a new normal probably emerging there, which has the more limited supply of semiconductors built into OEM planning in a way that was probably not possible earlier in the year," Fulthorpe said during a Dec. 16 presentation to reporters and IHS customers.

Used pricing boom

In December, prices of used vehicles sold by franchised dealerships were expected to surpass $30,000 for the first time ever, according to J.D. Power. Through the middle of the month, the average used-vehicle price surged to $30,316, up about one third from $22,875 in December 2019. The vast majority of the jump was because of higher vehicle values, with only 7 percent a result of changes in segment mix.

The average transaction price for new vehicles rose to $44,427 as of mid-December, up 17 percent from a year earlier, J.D. Power said.

Larry P. Vellequette and Michael Martinez of Automotive News contributed to this report.

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