Sales of new vehicles are continuing to show signs of slowdown in July despite strong consumer demand.

Cox Automotive estimated the July seasonally adjusted sales rate or SAAR is expected to fall to 15.2 million, down from June’s 15.4 million level. July will witness the slowest sales pace of 2021 and mark the third consecutive monthly decline after hitting a post-COVID-19 peak in April, Cox’s analyst said.
Sales volume in July is forecast to rise 7.8% compared with last July, but with 27 selling days this year, one more than last year, that is a minimal gain, according to Charlie Chesbrough, senior economist at Cox Automotive, observed.
“The sales pace has really been falling throughout the month — and quickly,” he added.
July U.S. auto sales are expected to reveal a new-vehicle market with a large problem — too few products to sell, Chesbrough added.
Inventory levels drop again
Chesbrough said Inventory levels were tight to start the year after factory closures during the COVID-19 pandemic in 2020, but the global chip shortage has significantly impacted vehicle production this year causing available supply to be at a critically low level, he said.

At the beginning of July, vehicle inventory dropped to a 25-day supply, according to the estimates from by Cox. For consumers, low supply and high demand means finding and buying their next vehicle may be a challenge.
Vehicle shoppers may have a challenging time finding the exact vehicle they want. However, sales of passenger cars increased in July, Cox noted in its report. Sales of compact cars increased by more than 16% and sales of midsized cars jumped 7 percent.
Through the spring, inventory levels were extremely low, yet sales were able to maintain a strong pace. However, during the last two months, the sales pace has declined while the dearth of products grew.
Blame it on the chips
It is expected sales will continue to be constrained by a lack of inventory through August and September but should improve in fourth quarter as chip orders from manufacturers see more fulfillment, Cox noted in its monthly analysis of sales.
Haig Stoddard, an analyst with Wards Intelligence, noted sales could reverse course next month. But making it a challenge is that inventory is expected to decline 8% in July from June, as well as the elevated level of uncertainty how fast production can rebound in the third quarter due to lingering risks with the flow of microchips.