December Auto Sales Still Looking Weak

While the official figures haven’t dropped, just about every outlet tracking new vehicle sales is projecting a significant decline in volume for December 2021. Showrooms have been trending toward the minimalist aesthetic since 2019 with the pandemic kicking things into overdrive as supply bottlenecks nullified practically every manufacturer’s ability to produce anywhere near its normal pace.

Last December was bleak, with sales falling by around 5 percent for the month as the typical transaction price for automobiles set new records. The U.S. market only saw 1.54 million sales, the lowest volume witnessed since December of 2014. But 2021 volumes are shaping up to be decidedly worse. This month is on track to fall by anywhere from 23 to 30 percent with retail sales barely cresting 1 million units as transaction prices for both new and used vehicles surpass all previous metrics.

The exact number depends on who you’re asking and ultimately hinges on what reality brings after the figures are tallied in January. However J.D. Power, LMC Automotive, and TrueCar are all forecasting light vehicle sales to be down by anywhere from a quarter to a third year-over-year right now.

“Historically, December is a big month for the industry as OEMs and dealerships work to close out the calendar year with strong sales. The last week of the month is also typically the biggest week of the year in terms of sales volumes but it’s unlikely to happen this year due to continued inventory shortages and declining incentives,” said Nick Woolard, Lead Industry Analyst at TrueCar.

TueCar estimated retail sales to be down by 27 this December (YOY), planting its assessment smack-dab in the middle of other outlets. Though they’re all expecting volumes to be low this year with dwindling incentive spending usually receiving an honorable mention. Automakers were already abandoning incentives by the start of 2020. But spending for 2021 is down another 55 percent vs last year. Meanwhile, fleet volumes for December 2021 are expected to be down 29 percent from a year ago and down 3 percent from November 2021 (adjusted for the same number of selling days).

The truth of the matter is simply that automakers now have a captive audience. With fewer cars being constructed, there are far fewer on the lot. Average new car inventories were a staggeringly low 15 days in November. For the sake of comparison, normal inventories would have been somewhere in the 50-70 day range just a couple of years ago. Though we’ve already discussed the absolutely grotesque ways this has influenced pricing, so we’ll not risk depressing you again. Suffice it to say, new vehicle prices have continued to climb another 2.5 percent within the last month and we understand if you need to take a break from reading to angrily curse for a few minutes.

We suppose that the good news is that dealerships have remained quite profitable, provided they were large enough. According to the National Automobile Dealers Association, retailers actually recorded an average pretax profit of $3 million through the first nine months of 2021 — more than twice what they accomplished in 2020 within the same timeframe. Manufacturers may not be breaking records like dealerships are, however, most are performing decently despite there being a general lack of sales over the last two years. Some brands are even doing quite well (e.g. Jeep, Porsche) while others are just trying to hang in there (e.g. Cadillac, Infiniti, Aston Martin).

The industry is still estimated to have $200 billion lopped off the top due to complications stemming from parts shortages (specifically absent semiconductors) though. Just about everyone wants to know when this is going to end. We assumed pricing had gotten so out of whack by the summer of 2021 that they couldn’t possibly continue climbing without the whole economy being thrown out of whack. We even got promising news from a few suppliers that the issue was becoming more manageable, with parts shipments allegedly becoming more routine over the fall. But prices climbed anyway as vehicle inventories continued to fall, leaving us more than a little befuddled on the long-term ramifications.

Apparently, we aren’t alone in that feeling.

“In October we were seeing initial signs that the worst may be behind us in terms of inventory shortages. We continue to see signals of stability and in some cases, slight improvement. One such indicator, our scarcity measure, shows improvement in recent months for both new and used vehicles,” stated Valeri Tompkins, Senior Vice President of OEM Solutions at TrueCar. “However, questions still remain as to the trajectory of improvement we can expect to see in 2022.”

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