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By Nora Naughton
NEW YORK (Dow Jones) – Automakers are reporting a surge in vehicle sales in the US for the first three months of 2021. But chip bottlenecks and other problems in the supply chain threaten to destroy momentum.
Overall, US auto sales rose 11.3 percent from January to March, according to industry data from Wards Intelligence. According to Wards, the industry could sell 16.8 million vehicles on an annualized basis – a sign that demand is about as high as it was before the Covid-19 pandemic. The increase in the quarter is due in part to the collapse in business in late Mar 2020, when the economy shut down to contain the spread of the coronavirus. In January and February 2021, according to data from Motor Intelligence, sales fell by 3.3 percent and 13 percent respectively.
The numbers would probably have been even better had it not been for a global shortage of semiconductors affecting production at many US factories. This put a strain on manufacturers’ profits and led to lower inventory levels for dealers, especially for the popular trucks and SUVs. In February, winter storms in Texas also disrupted the production of plastics used in seat foams and other materials, adding additional strain to the industry’s supply chain. However, this did not affect customer demand.
Nissan reported an almost 11 percent increase in US sales in the first quarter. From US manufacturers, General Motors reported a nearly 4 percent increase in sales from January through March Thursday and expects demand to remain strong throughout the year. Stellantis – formerly Fiat Chrysler – reported a 5 percent increase in US sales, while Ford Motor sales were nearly flat.
Japanese manufacturers Toyota and Honda, which were hit by the chip shortage later in the quarter, reported US sales up 22 and 16 percent in the first quarter, respectively. South Korean automaker Hyundai Motor, meanwhile, was able to keep inventory levels at dealerships in the US stable in the first quarter, reporting sales growth of 28 percent.
The demand for new cars is expected to increase in the coming months when buyers have more money in their pockets thanks to the new stimulus packages. As demand continues to exceed supply, manufacturers have already scaled back the high discounts offered at the beginning of the pandemic.
The tight inventory didn’t have a big impact on buyers in the first quarter, but that will likely change in the coming months, said Cox economist Charlie Chesbrough. At the end of February, vehicle stocks at dealerships and in transit were 26 percent lower than a year earlier, according to the research company Wards Intelligence. Some dealers fear that it could hurt some key new model launches this year, while others have long-term confidence in demand.
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April 02, 2021 7:05 AM ET (11:05 GMT)