Headwinds persist for auto industry as US July sales fall 8.9% year on year
HOUSTON (ICIS)–The auto industry continues to face headwinds from limited inventory on dealer lots and recent moves by the US Federal Reserve to raise interest rates in an effort to slow inflation will increase borrowing costs, although the National Automobile Dealers Association (NADA) does not anticipate any impact on consumer demand.
US July sales of new light vehicles rose by 2.5% from June on a seasonally adjusted basis but are down by 8.9% from the same month a year ago, when the global microchip shortage first began to impact sales.
NADA chief economist Patrick Manzi said he anticipates sales reaching 14.2m units by the end of the year, largely because of the steady demand and the fact that demand for used autos remains high, so consumers can offset some of the increase.
July sales were at 13.4m units at a seasonally adjusted annual rate (SAAR).
The shortage of semiconductors – which control the engine, antilock brakes, power steering, fuel monitoring system and heating and air conditioning in modern vehicles – has lingered much longer than automakers and industry analysts said it would.
The shortage has weighed and continues to weigh on dealer inventories, Manzi said.
At the start of July, new-vehicle inventory on the ground and in transit was at 1.2m units and Manzi said he expects that number to remain consistent through the end of the month.
The US government has taken steps to help alleviate the shortage, but actions such as the US Senate’s passage of the Chips and Science Act of 2022 are geared more toward the future and are unlikely to offer immediate help.
The bill has passed through the US House of Representatives and President Joe Biden will sign the bill into law on Tuesday.
The bill includes $52bn for domestic chip production and includes investment tax credits for new chip manufacturing plants.
The data also showed that sales of battery electric vehicles (BEVs) reached 5% of all new light-vehicle sales through July 2022, which is the highest market share for BEVs to date, according to NADA.
Manzi said 34% of all BEV sales this year have been through franchised dealerships, which NADA anticipates will continue to grow each year as new models are introduced.
Over the weekend, the US Senate passed the Inflation Reduction Act, which includes some provisions aimed at accelerating the adoption of electric vehicles (EVs) via rebates and tax credits.
The automotive industry is a major consumer of petrochemicals, which contributes more than a third of the raw material costs of an average vehicle.
Polymers used in automobiles include polypropylene (PP), polyurethanes, nylon, acrylonitrile-butadiene-styrene (ABS), styrene acrylonitrile (SAN), polycarbonate (PC) and styrene butadiene rubber (SBR).
Focus article by Adam Yanelli
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