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        home > news > Automakers > Despite Production Cuts Due to Chip Shortages Vehicle Inventory Remains Stable

        Despite Production Cuts Due to Chip Shortages Vehicle Inventory Remains Stable

        Inventory levels on luxury vehicles lower than mainstream models.

        Joseph Szczesny
        Joseph Szczesny , Executive Editor
        Jan. 22, 2021
        Inventory levels for luxury vehicles were lower than the industry average at 65 days supply.

        Despite the threat of computer chip shortage hovering over the industry, the supply new vehicles remained stable at 3 million units in December, according to a new report from Cox Automotive.

        Cox reported it was the first time that supply hit 3 million vehicles since last May when sales dropped dramatically after the lockdowns caused by the COVID-19 pandemic.

        “Inventory levels appear to be stabilizing over recent weeks as days’ supply has been nearly unchanged since late November,” said Charlie Chesbrough, Cox Automotive senior economist. “Available supply has been rising, but so have sales. The combination keeps days supply stable.”

        (Pandemic acts as catalyst for additional change in auto industry, analysts suggest.)

        The days supply stood at 70, down from 75 the month earlier and well off the 85 days supply of a year ago.

        Toyota’s Tundra supply was already extremely low when it was forced to suspend production.

        Luxury vehicles were lower than the industry average at 65 days supply. Japanese luxury brand Lexus, and Germany’s BMW and Mercedes-Benz have been running with low inventory levels for months. Meanwhile, the rest of the industry has been sitting at 71 days supply. The Cox Automotive days supply figure is based on the daily sales rate for the most recent 30-day period.

        However, Cox also noted just as parts and assembly plants were getting back up to speed, a global shortage of computer chips has forced automakers to trim production. In North America, Ford, Honda and Fiat Chrysler have all been forced to shut down plants temporarily due to the chip shortage.

        Toyota, however, may have had to deal with the toughest break, trimming production Tundra pickup truck production, which has been running at less than 30 days supply for months as demand market trucks has boomed, Cox noted.

        (Nissan, Honda slash production due to chip shortages as GM, Daimler, others warn of similar moves.)

        Other automakers, including Nissan and Honda, have slashed production at their overseas plants. Volkswagen said it will be forced to do the same at plants in Europe, China and the U.S.

        Automakers and dealers were just getting back to normal when the semiconductor issue cropped up.

        Jessica Caldwell, Edmunds’ executive director of insights, noted the shortage of chips could “throw a big wrench in production” just as automakers were getting into a healthy groove.

        Edmunds analysts said the auto industry is on pace for a stable market resulting in better sales this year. It is predicting 15.5 million new cars will be sold in 2021 — a 6.5% increase compared with 2020.

        “Despite the economic hardships faced by so many Americans during the pandemic, there’s still a large population of well-off consumers who have been taking advantage of favorable financing conditions and sustaining healthy demand in the new car market,” Caldwell added.

        Prices will continue to rise on new vehicles, which will become more “exclusive,” and the pandemic will drive “an income divide among Americans,” she said. In December 2020 the average transaction price for a new vehicle hit an all-time high of $40,573.

        (Auto sales gain traction as Americans avoid mass transit.)

        Edmunds analysts expect this number to go up as affluent consumers benefiting from lower interest rates and healthy stock and housing markets continue buying bigger, more expensive new trucks and SUVs, she said.

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