Auto production, supply still ‘wild cards' for 2022

Lower-than-expected U.S. light-vehicle sales in the first half of 2022 reinforced the damage and unpredictability of the global microchip shortage that has plagued the industry for more than a year.

Auto makers sold 6.8 million new vehicles in the first six months of the year, down 18 percent from a year earlier, according to the Automotive News Research & Data Center. Virtually every auto maker except Tesla experienced a year-over-year sales drop in the first half of 2022.

Most dealerships still lacked the more normalized inventory levels that prognosticators expected to have returned by now, and as a result, many forecasters have lowered their full-year projections for U.S. new-vehicle volume. Still, some optimism remains for the back half of the year.

Demand continues to be strong despite record average transaction prices and whispers of an impending recession, and some executives have said chip supplies could improve enough in the coming months to boost inventories in the fall and winter.

"The weakness in sales is not related to demand at all," Michelle Krebs, executive analyst at Cox Automotive, said in an interview. "We anticipate it will continue to be strong. The big question is whether the auto makers can produce at a level to satisfy that demand and boost sales."

Cox last month slashed its full-year outlook by nearly 1 million vehicles to 14.4 million.

For the most part, Krebs said, the rate of vehicle production hasn't changed much from late last year as auto makers and suppliers struggle to get parts. June marked the sixth consecutive month with output stuck between 1 million and 1.1 million vehicles, Cox said.

But auto makers have been affected differently.

Toyota has had to make especially steep production cuts, helping General Motors reclaim the U.S. sales crown in the second quarter. On the opposite side, Krebs said most Stellantis brands are roughly back to having pre-pandemic supply levels.

"Supply chain and production are wild cards," Krebs said. "There's such mixed signals about the chip shortage and production. We think things will improve in the second half, but we thought they'd improve in the first half."

One bright spot in the first six months of 2022 was increasing sales of electric vehicles, which accounted for 5.2 percent of the overall market in the second quarter, Krebs said.

The growing popularity of EVs helped propel Ford Motor Co. to a second-quarter sales increase and gave Tesla a tighter grip on the luxury market.

The high prices of most EVs aren't scaring off shoppers, reflecting a larger industrywide trend across powertrains.

LMC Automotive said June's average transaction price jumped to a record $45,988 and could be discouraging some shoppers, although Cox doesn't believe high prices are denting demand.

"We think the new-car market has shifted to a buyer who's much more affluent," Krebs said. "Many of the buyers who can't afford the high prices have dropped out."

Ford's F-Series line continued its dominance in the full-size pickup segment through June, although the second-place Chevrolet Silverado trails by fewer than 40,000 vehicles. F-Series sales have fallen 17 percent year to date, but the full-year tally will be aided by the newly launched F-150 Lightning as Ford continues to ramp up production that began in late May.

After rising to second place among pickups in 2021, the Ram pickup has fallen back to third place, trailing the Silverado by about 15,000 vehicles.

Tesla sold an estimated 90,100 of the Model 3, good for No. 3 among sedans, and is about 27,000 vehicles away from supplanting the Toyota Corolla in second place.

The California EV maker leads BMW by about 76,000 vehicles in the sales race among luxury brands.