Sales of new vehicles are dropping again in January, according to analysts, when measured against January 2021 as slender inventories act as a brake on deliveries as semiconductor shortages continue to hover over the industry.
A joint forecast from J.D. Power and LMC Automotive estimates retail sales of new vehicles this month are expected to reach 828,900 units, an 8.3% decrease compared with January 2021. Total new-vehicle sales for January 2022, including retail and non-retail transactions, are projected to reach 932,100 units, a 15.6% decrease from January 2021, according LMC and J.D. Power.
“Despite optimism towards the end of 2021 that diminishing supply chain disruption would result in more vehicles being delivered to dealerships,” Thomas King, president of the data and analytics division at J.D. Power.
“The new-vehicle supply situation has shown no meaningful improvement. January month-end retail inventory is expected to be below 1 million units for the eighth consecutive month.”
King added the volume of new vehicles being delivered to dealerships in January has been insufficient to meet strong consumer demand, resulting in a significantly diminished sales pace.
Semiconductors still in short supply
The supply chain issues, which date back to autumn of 2020 as the first phase of the pandemic began to ease, are still dogging the industry.
Toyota closed its 11 assembly plants in Japan due to the continuing semiconductor shortages, while Ford shut the company’s Flat Rock assembly plant where the Mustang with an internal combustion engine is built last week and Stellantis closed its assembly plant in Windsor, Ontario this week.
Tesla CEO Elon Musk told analysts the shortages of semiconductors continue to threaten his company’s production plans and he does not expect the situation to improve until the end of 2022.
A new report from the U.S. Department of Commerce said this week semiconductors remain in short supply, leaving plants such as those in the auto industry facing potential shutdowns.
The situation could get worse because of China’s use of strict lockdowns to fight any spread of COVID-19, the Commerce Department noted. Even though it is being scaled back by new COVID-19 restrictions, the celebration of Chinese New Year next month, China’s biggest holiday, also will disrupt supplies of semiconductors as demand surges.
The agency estimates demand for semiconductors has increased by 17% since 2019, and Musk says even the most basic chips seem to be in short supply.
