U.S. auto sales have rebounded big time from coronavirus-induced demand plunge last year. So far in 2021, vehicle sales in the United States have managed to grow year over year despite the chip crunch. In fact, the last month was a particularly good one for the industry, with many automakers hitting monthly sales records. Per US Automotive News, vehicles sales not only skyrocketed from the year-ago levels when the market was wrecked by coronavirus woes, but also rose from May 2019 levels for many of the auto firms. Seasonally adjusted annualized rate for vehicle sales for May beat forecasts from various analysts.
Quite a few auto biggies that still report sales on a monthly basis enjoyed double-digit year-over-year sales growth in May. Japan-based auto giants
Toyota ( TM Quick Quote TM - Free Report) and Honda’s ( HMC Quick Quote HMC - Free Report) U.S. vehicle sales jumped more than 40% year over year. Hyundai posted a monthly sales record for the third straight month, with sales shooting up around 56%. This Korea-based automaker’s sales in the United States also climbed 36% from May 2019.
Many factors have contributed to the rebound of vehicles sales from the year-ago level. For one thing, there is a huge pent-up demand. Economic recovery and improvement in consumer spending buoyed by widespread vaccination drive and massive fiscal stimulus have aided sales of big-ticket items like cars. Easier credit conditions and preference for personal mobility have further boosted sales.
While automakers and dealers are cheering buyers’ strong appetite for vehicles, we are not sure if the industry would be able to meet the mounting demand amid global chip crunch and falling inventories. As inventories are drying up fast amid strong sales and supply chain disruptions due to semiconductor shortage, automakers may not sustain the growth momentum, going forward. In the absence of a quick solution to this chip problem, consumers are likely to have a hard time in finding new vehicles and specific models at dealerships.
Many of the auto bigwigs including
Daimler AG ( DDAIF Quick Quote DDAIF - Free Report) , Ford ( F Quick Quote F - Free Report) and Stellantis ( STLA Quick Quote STLA - Free Report) are warning of production hit amid chip crisis, which is likely to mar their near-term profits. Even the electric vehicle behemoth Tesla ( TSLA Quick Quote TSLA - Free Report) has not been immune to the acute semiconductor famine. Chip crunch is impacting its manufacturing goals. While the firm is fast pivoting quickly to new microcontrollers and is actively engaged in building firmware for new chips manufactured by suppliers, production and supply chain challenges remain.
Only the automakers that will be able to successfully navigate the chip deficit and replenish the dealerships with new vehicles as soon as possible will emerge as winners in this scenario. For instance, U.S. auto biggie
General Motors ( GM Quick Quote GM - Free Report) recently announced that its 1H21 results are likely to be significantly better than the previous forecast, as the Zacks Rank #1 (Strong Buy) firm has managed to rev up production and deliveries despite chip crunch, thanks to key engineering changes, prioritization of microchip usage and production line efficiencies. You can see . the complete list of today’s Zacks #1 Rank stocks here
Also, Toyota has managed to remain relatively unfazed by the chip shortfall, thanks to advanced supply chain planning. In fact, the company projects fiscal 2022 consolidated vehicle sales of 10.5 million units, indicating an increase from 9.9 million units sold in fiscal 2021.
While things are still looking bright for a few companies, many are going to find it difficult to rapidly restore inventories amid supply chain distortions, which may cause speed bumps in overall sales of vehicles in the United States this summer season.
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