In the aftermath of the worst of the Covid-19 pandemic, the auto industry has shown strong growth and recovery. However, according to a newly released report, the sector could see a drastic drop for August.
Based on the new information released by J.D. Power and LMC Automotive, auto sales are expected to fall by 14.3%, down to 987,100, compared to last August. The driving factors behind this decrease are the continuing shortage of semiconductors along with the fast-spreading Delta variant of the coronavirus. The Delta variant has caused supply lines to constrict as nations attempt to limit transmission rates by enforcing stronger social distancing rules again.
Jeff Schuster, president of America’s operations and global vehicle forecasts at LMC, said that “Global light vehicle demand remains under pressure from the severe inventory constraints caused by the semiconductor shortage as well as disruption from the COVID-19 Delta variant.”
Currently, dealers have around 942,000 vehicles in inventory. By comparison, dealers had about $3 million in inventory two years ago. “The industry has insufficient inventory at dealerships to meet strong consumer demand. The consequence is that the retail sales pace is depressed, but transaction prices are elevated,” said Thomas King, president of the data and analytics division at J.D. Power.
Average transaction prices are expected to rise by 16% to $41,378, mainly due to a lack of incentives being offered by dealerships.
The inventory situation is expected to remain tight going into September, with supply chain issues anticipated to continue as manufacturers continue to announce reductions to their manufacturing plans. Based on these factors, analysts have lowered their forecast for expected light vehicle sales once again, this time by 2 million units, dropping to a total estimate of 83.8 million units.