US auto sales forecast Q1 2022 chips, looks dark due to inflation

New Jeeps unveiled at a car dealership in New York City on October 05, 2021.

Spencer Platt | Getty Images

Automakers are likely to report sharp sales declines for March and the first quarter, with industry analysts saying car dealers have fewer – and often more expensive – choices due to the ongoing shortage of new vehicles.

U.S. auto sales forecasts from Cox Automotive, Edmunds, and JD Power / LMC Automotive show that first-quarter sales of cars, pickup trucks, and SUVs were probably below 3.3 million, down 14% from the first quarter of 2021.

For some automakers, the fallout could be even worse. Edmunds expects General Motors, Honda, Nissan, and Volkswagen to report annual sales declines of more than 20% for the first quarter, while Ford’s position is somewhat better.

But while sales are declining, prices are rising: TrueCar Analysts say the average selling price of a new car in the U.S. probably rose 15.4% in March from a year earlier, to about $ 43,500.

Consumer concerns about inflation – including higher gas and car prices – have probably played a role in the decline in projected sales in the quarter, which included an expected 24% drop in March. But the biggest reason is the thin supply of new cars amid the global shortage of semiconductor chips.

“Gas prices skyrocketed for consumers in March, but the lack of inventory finally led to disappointing new car sales in the first quarter,” said Jessica Caldwell, executive director of Insights at Edmunds.

Edmonds’ forecast calls for a 15.2% year-over-year decline in first-quarter auto sales. The company said inventories are very thin, with only 20-day gas-powered vehicles and 21-day priced electric vehicles available. Automakers typically aim to keep adequate vehicles for 60 to 70 days.

Caldwell noted that while automakers are still struggling with covid-related supply-chain disruptions, they may now face additional supply challenges in the wake of Russia’s invasion of Ukraine.

Charlie Chesborough, a senior economist at Cox Automotive, noted that U.S. auto sales traditionally increased in March with the onset of spring in most parts of the United States. He thinks consumer demand will probably be stronger now – if only carmakers had more cars to sell.

“Low unemployment, relatively low interest rates – the conditions are right for high sales,” Chesborough said. But, he said, sales will remain weak until automakers are able to increase the number of cars in dealers’ lots.

“Make no mistake,” he said, “this market is stuck in low gear.”

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