Schuster said auto makers have lost 6.8 million units of planned vehicle production so far this year around the world, and they could drop another 2.6 million before the end of 2021 as the microchip shortage continues to roil the industry. And he believes that empty dealership lots, lower incentives and higher prices are going to start to drive some customers out of the market.
"We're starting to see the risk that buyers are going to pull out, that they're not going to pay those prices for something that's not exactly what they want," Schuster said.
In North America, production is actually up 3.7 percent through September from last year's COVID-19 shutdown-constrained figures, according to the Automotive News Research & Data Center, breaking a four-year streak of production declines in the region. However, through the first three quarters, auto makers cut 2.2 million vehicles from planned production, including 1.98 million because of the microchip shortage, and collectively lost over 3,000 production days in assembly plants because of supply shortages, said Bill Rinna, LMC's director of vehicle forecasts for the Americas.
Rinna said General Motors and Ford Motor Co. have been hardest hit so far in North America, with GM losing an estimated 675,000 vehicles from planned production and Ford cutting about 600,000. By comparison, Toyota and Stellantis have each lost roughly 300,000 vehicles, Rinna said.
The lost production and strong-though-cooling demand brought inventories down to under 1 million vehicles, or a 24-day supply, at the end of September, compared with what Rinna called a "normal" level of 65 days. However, LMC analysts said inventory levels were expected to begin to recover later in the year as microchip shortages ease and could recover to about 2.5 million vehicles by mid-2022, with more normalized levels returning in the later part of 2023.
Last week, Toyota said it will cut global production 15 percent in November, but the impact will not be as painful as its cutbacks in September and October. And the auto maker finally sees signs of recovery.
"I think we are over the worst period," said global procurement manager Kazunari Kumakura.
Augusto Amorim, senior manager for Americas vehicle sales forecasts at LMC, said the company sees Toyota Motor North America retaining its current sales lead over GM through the fourth quarter and likely keeping it through 2022 as microchip shortages continue to play out.
"We expect 2022 to be a tie with GM in market leadership and expect GM to regain market leadership [in North America] in 2023," Amorim predicted.
He said light-truck sales will continue to grow relative to cars. "There's still a market for cars, especially for compact cars," he said, but overall, car sales will not come back.
Amorim detailed other retail trends that may be concerning for dealers over the longer term. He said lease penetration in the U.S. is moving down, and in September, more new vehicles were financed than leased.
He said borrowers are also looking more favorably at noncaptive lenders that are offering competitive terms. "As OEMs keep cutting incentives, transaction prices continue to grow and, with them, monthly payments," he wrote in an email to Automotive News. "All those 84-month loans with 0% APR that we saw when the pandemic first hit are mostly gone. There are still a few captive lenders offering 72-month loans (Ford still has a plan with 0% APR for 72 months for the F-150, for example), but they aren't too common anymore. However, noncaptive lenders still offer these longer terms. Even if their APR is higher, consumers are paying less monthly, and that's what most people look at."
Both trends could impact auto maker and dealer abilities to recapture customers by either pulling leases ahead or luring buyers with attractive captive offers, which in turn could weaken availability of late-model off-lease vehicles.
