Shrinking inventory and fewer buyers pose risks to the auto industry – Dealer Ops

Car buyers are still faced with bare-bones showrooms. U.S. retail inventories are expected to have fallen to 900,000 vehicles in July, according to JD Power.

But now the new problem is fewer buyers.

“Rising interest rates and low consumer sentiment are keeping many potential buyers out of the market,” Charlie Chesbrough, senior economist at Cox Automotive, told Automotive News. “[Meanwhile,] higher prices for both gasoline and vehicles make affordability even more of a challenge.”

However, in the near term, Chesbrough admits that tight supplies “continue to be the biggest obstacle … and there is little evidence that supplies are returning to normal.”

Automakers blamed those tight inventories for the double-digit sales declines posted by six of the seven automakers in July. In total, these automakers reported a 15% decline in sales from 2021, according to the Automotive News Research & Data Center.

LMC Automotive reported that US sales fell 12% in July, the 12th straight month of year-over-year volume declines.

And retail sales fell below 1 million for the third month in a row in July, LMC reported.

Motor Intelligence reported annual sales of 13.5 million in July, down from 2021’s 14.81 million but higher than June’s SAAR of 13.22 million.

In response, LMC cut its 2022 forecast for US light vehicle output to 14 million from 14.3 million in June, noting that “uncertainty is increasing” through 2023.

Jesse Toprak, chief analyst at Autonomy, told Automotive News that he doesn’t expect a “full recovery” in industry sales for at least two years.

“Geopolitical risks will remain,” he said, noting that the situation in Taiwan is being closely watched because the country produces the bulk of the semiconductor chip supply.

Ford Motor Co. became the only automaker to post a year-over-year increase in July sales, up 37% in the U.S. in July.

Sales of the company’s crossovers and trucks grew by 70%, thanks to new models such as the Mustang Mach-E, Bronco and Bronco Sport. The volume of collection increased by only 27%.

However, Ford reported that more than half of July sales came from previously placed orders.

Toyota Motor’s North American sales fell 21%, with Toyota sales down 21% and Lexus sales down 23%. The sales decline marks the automaker’s 12 consecutive months of sales declines. However, Tacoma sales were up 1.4% to 23,917, and Tundra volume was up 66% to 10,694.

American Honda recorded July sales down 47%, with Acura sales down 59% and Honda division sales down 46%. Sales of Hyundai and Kia fell by 11%. Only four Hyundai models — the Accent, Santa Cruz, Tucson and Veloster — saw sales increase in July. Subaru sales fell 17% in July, while Mazda sales fell 29%.

Volvo reports 41% drop in July volumes, Genesis sales up 20 years^thousand month in a row to 5,203 deliveries.

Vehicles on the lot are often already discussed, such as these Ford Broncos in Granger, Iowa.

LMC cites the inventory crisis as the reason for the fall in sales. The inventory shortage cost automakers 1.65 million units of potential demand in the U.S. through July.

Kia, Toyota, Subaru, Honda, Lexus, Porsche, Hyundai, Land Rover, BMW and Acura started July with the lowest inventory levels, while Ram, Volvo, Jeep, Lincoln and Audi had the highest inventory levels, according to Cox Automotive .

Toyota had 104,790 vehicles in stock at the end of July — 14,258 in dealerships and 90,532 in port or transit — with a 16-day supply. Hyundai ended July with 14,784 passenger vehicles in US inventory, up from 46,113 at the end of July 2021. And Mazda closed July with just 6,868 vehicles, or six days’ supply.