Chips are down for automakers – and so are car sales
The large number: Ford, General Motors and other automakers were happily anticipating their best selling year in 2021: more than 18 million vehicles sold. Then the chip shortage hit.
Now the auto industry might have a chance to match the depressed sales of 2020.
What happened: Thanks to a resurgent US economy and ultra-low interest rates, sales of new cars and trucks soared in early 2021. Used cars were also hard to come by and increasingly people felt comfortable driving instead of using public transportation due to the pandemic.
At one point, the auto industry was on track to sell over 18 million vehicles in one year for the very first time. This would have broken the old record of 17.9 million cars and trucks sold in 2016 and 2015.
Read: Retail sales in the United States rise sharply, but customers pay more due to high inflation
Yet a global shortage of computer chips started to be felt – and harshly – from late spring. Sales declined in May, fell again in midsummer, and fell in early fall.
In September, the annualized sales rate had fallen by a third to just 12.6 million vehicles, from 18.8 million in April.
The annualized sales rate refers to the number of vehicles that would be sold if the pace of customer purchases during a month were replicated to each month of the entire year. It is a standard benchmark used by investors and executives to assess sales strength.
What this means: Unfortunately for automakers, the chip shortage is expected to last until 2022. Automakers will have to wait at least a year, if not longer, to set a new sales record.
And if sales continue to decline, the industry could have the chance to match the depressed 2020 sales of 14.9 million vehicles.
Considering the large size of the US auto industry, this also means that the US economy cannot grow as fast as it did when car sales were booming and factories were in full swing. .