Decline in auto sales stirs concerns

Decline in auto sales stirs concerns

Automakers and dealers are worried about affordability as supply-chain woes keep inventory levels low and customers are hit with increased inflation, high gas prices and climbing interest rates.

Domestic and foreign automakers on Friday posted U.S. sales declines for the first three months of the year, with Cox Automotive Inc. forecasting the period could tally the worst first-quarter volumes in a decade. After more than a year of a global microchip shortage that bit hard into inventory levels, the slide is leaving dealers empty-handed and demanding customers pay the sticker price or above.

The price increases — likely to remain as automakers push to rebuild inventories — already are pushing some potential buyers out of the market. The average monthly payment for new vehicles purchased in the first quarter is expected to climb to $648 from $575 a year ago, according to analysts at Inc., a car information website — the highest level that Edmunds has on record.

“There’s a lot of demand,” said Jessica Caldwell, Edmunds’ executive director of insights. “And when prices become more friendly, there’s going to be all this deferred demand that’s going to come back into the market, so there’s going to be a lot of demand for quite some time.

“Right now, people may have hit their max capacity on food prices and gas prices and car prices and rent prices. It seems to be a bit of a pressure cooker for consumers to be able to mitigate all of these increased costs.”

General Motors Co. on Friday said its dealers sold 512,846 vehicles in the first quarter this year, down 20% from last year as slumping inventory continued to limit sales. Jeep and Ram maker Stellantis NV’s sales dropped 14% year over year for the first quarter to 405,221 vehicles. Ford Motor Co. reported a 17% drop for the first quarter.

Kia America’s sales in the first quarter dropped 5% year over year. Hyundai Motor America’s sales declined 4%. American Honda Motor Co. posted a 23% decline for the quarter. And once again, Toyota Motor North America surpassed GM’s U.S. sales with a total of 514,592 sales reported in the first quarter for a 14.7% year-over-year decline.

GM said it ended the first quarter with 273,760 vehicles in dealer inventory, including in-transit units. By comparison, there were 128,757 vehicles in inventory at the end of the third quarter in 2021, and 199,662 at the end of the fourth quarter. Despite some recovery in its vehicle stocks, the automaker expects its inventory will remain low this year due to the high demand.

“As far as new cars, the inventory is getting better, but it’s still not the same,” said Walt Tutak, general manager at Matthews-Hargreaves Chevrolet in Royal Oak, Mich. “What we’re doing is we’re concentrating a little bit more on used cars, and we’re buying a lot of these leases.”

Near the end of last month, the dealership had 40 vehicles on the lot and half of those were sold, Tutak said: “The demand will always stay strong because the volume is down. People need cars. Their leases are expiring. Their used cars are getting older.”

But production challenges persist: Stellantis on Friday said Mack Assembly Plant in Detroit, home of the two- and three-row Jeep Grand Cherokees, along with Belvidere Assembly Plant in Illinois, which makes the Jeep Cherokee crossover, will be down this week because of the shortage of microchips.

That comes after GM said two of its plants will idle this week. The Lansing Grand River plant in Michigan, where workers build the Cadillac CT4, CT5 and Chevrolet Camaro, is down as a result of an unspecified shortage not related to semiconductors. The Fort Wayne, Ind., truck plant, home to the Chevrolet Silverado 1500 and the GMC Sierra 1500, is down this week and next because of the semiconductor shortage. Ford’s Mustang plant in Flat Rock, Mich., is also down this week because of the semiconductor shortage.

Demand for electric and hybrid vehicles shot up in recent weeks, said Michelle Krebs, executive analyst for Cox Automotive Inc.

“It’s not just idle shopping; it’s buying,” said Krebs, noting inventory seems to be limiting sales. “For Toyota sales, their electrified sales are lower than last year, but the percentage of overall sales is higher. The Rav4 Hybrid is their top-selling. It’s just the low supply.”

When James Salter, 50, of Superior Township, Mich., found himself in the market for a new vehicle, he knew he wanted a hybrid to reduce his gas costs. He had learned about the difficulties mechanics are having in getting parts when he went to get a new clutch for his 2016 Hyundai Elantra with a manual transmission. As an Uber and Lyft driver, he couldn’t have his vehicle out of commission for weeks or months.

“Right now, if he got a Ford F-150 that needed the rear differential rebuilt, he couldn’t do it until at least summertime,” Salter said of the technician at the repair shop. “Because there weren’t the proper parts available to do it. And that just petrified me.”

He had a short list of vehicles he liked including the Ford Escape and the Hyundai Tucson, but he settled on the Toyota Venza XLE hybrid. After ordering it in mid-January for the manufacturer’s suggested retail price of $36,425, his blue 2022 Venza arrived in late February.

“I was really intrigued by 40 miles a gallon in the city,” Salter said. “And then I saw the styling of this car was like, ‘Oh, this is pretty sharp, too.'”

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