HOUSTON (ICIS)--US July sales of new light vehicles fell from June, marking the third straight month of decreases as the industry continues to deal with supply chain issues and a global shortage of semiconductors.
North American automakers have had to adjust production schedules because of the chip shortage, which arose from a surge in demand as economies began to reopen from coronavirus lockdowns.
According to seasonally adjusted annual rates (SAAR) from the US Bureau of Economic Analysis (BEA), sales fell by 3% from the previous month.
Year on year, sales were 0.3% lower than in July 2020.
However, a more accurate comparison is to July of 2019, which was before the coronavirus pandemic arrived and led to mitigation efforts that shut down global economies.
Sales are down by more than 13% from July 2019 - seasonally adjusted - and are down by 7.8% on an unadjusted basis.
Patrick Manzi, chief economist for the National Automobile Dealers Association (NADA), said that tight inventories on dealer lots limited sales.
Industry-wide, inventory levels at the end of July are likely to come in below 1.3m units, down from 1.4m at the end of June, Manzi said.
“Earlier in the year, inventory constraints meant consumers might have had to settle for a different colour or trim,” Manzi said. “But with inventory levels at record lows, many in-market consumers have had to settle for a completely different model or place an order for their desired vehicle.”
Major US automakers are anticipating a surge in production in the second half of the year as the global shortage of semiconductors begins to ease.
Executives from Ford Motor Co and General Motors (GM) said during second quarter earnings calls recently that while production is expected to improve in the second half due to improved supply of microchips, the industry is still likely to face headwinds from the Delta variant of the coronavirus.
But Manzi cautioned that additional production adjustments could be forthcoming from automakers, which is likely to keep inventory levels in August similar to July.
Despite growing concerns surrounding rising infections of the Delta variant of the coronavirus, Manzi sees demand remaining strong through the rest of the year.
“Despite production limitations from the chip shortage, new-vehicle demand remains strong among both retail and fleet customers,” Manzi said. “Our total 2021 forecast for new light vehicles is 16.5m units.”
Thumbnail image shows automobiles. Image by Slavek Ruta/Shutterstock
The automotive industry is a major global consumer of petrochemicals which contributes more than a third of the raw material costs of an average vehicle, and production disruptions could severely weigh on demand.
The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethanes and methyl methacrylate (MMA)/polymethyl methacrylate (PMMA).