When Does New-Car Supply Bounce Back? Not In July, Or In 2022, Either

Due mostly to low availability of new cars and trucks, U.S. auto sales in July are on a pace to fall around 6% vs. the same month a year ago.

With little reason to hope for any significant improvement in new-vehicle supplies this year, industry experts are already talking about next year or even the year after, before inventory catches up with demand sufficiently for new-vehicle prices to come back to earth.

“We’re selling everything we have,” said David Hult, president and CEO of Asbury Automotive Group, Duluth, Ga., in a conference call this week to announce second-quarter earnings.

According to a joint forecast from J.D. Power and LMC Automotive, July will be the ninth month in a row new-vehicle retail inventory falls below a total of 900,000 cars and trucks. The forecast predicts July auto sales of about 1.2 million units, down 5.7% vs. a year ago. That’s including sales for daily rentals, corporate and government fleets.

Cox Automotive has a similar but slightly lower forecast for July auto sales, which rounds off to 1.1 million. Atlanta-based Cox Automotive cites “recovery headwinds,” such as rising interest rates, higher gas prices, and lower consumer sentiment in its forecast.

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While those are obvious, potential threats, forecasters for both Cox and J.D. Power-LMC agree that tight supply is the No. 1 problem depressing auto sales, and there’s no short-term relief in sight.

Analysts blame the new-vehicle shortage on a shortage of computer chips, but the continuing COVID-19 pandemic is a contributing cause to the chip shortage, as well as other supply-chain bottlenecks.

How low is 900,000 units, anyway? To put the inventory shortage in context: pre-pandemic, new-vehicle inventory averaged around 3.5 million in 2019, according to Cox Automotive.

“We continue to experience solid demand across all of our revenue streams, but we do not anticipate a meaningful recovery in new inventory levels in 2022,” Asbury’s Hult said in the conference call.