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US Q2 Sales Continue to Forge Ahead Despite Inventory Dearth

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The U.S. auto sales continued to gather steam in the second quarter of 2021 despite the ongoing global semiconductor supply crisis plaguing vehicle production. Amid the rising demand for sport utility vehicles (SUVs), most automakers reported an upswing in the U.S. quarterly sales. Per Bloomberg, U.S. new car sales are anticipated to hit 4.4 million vehicles in the second quarter, up 51% from the prior-year quarter — a period heavily impacted by the COVID-19-induced shutdowns. Moreover, the sales figure was even slightly above the same period in 2019, when adjusted for selling days.

The pandemic-induced rising preference for individual personal transportation over shared options is spurring demand for vehicles even as prices continue to shoot up on constrained inventories following a global semiconductor shortage. Also, low interest rates and government stimulus have triggered demand for new vehicles in the country. The soaring popularity of electric vehicles (EVs) has also contributed toward the rising vehicle sales in the United States.

With the global economy gradually recovering from the wreckage caused by the pandemic, auto sales managed to rebound faster than anticipated. The June-end quarter kicked-off strong in the United States with stellar sales figures in April. Nonetheless, vehicles sales for the month of June started to tail off as inventories in the dealerships began to dwindle due to the shortage in the supply of semiconductors. Per Emmanuel Rosner, an analyst with Deutsche Bank, seasonally adjusted annualized rate for new vehicle sales dropped to 15.7 million units in June compared with the 18.6 million and 17.1 million units recorded in April and May, respectively.

Overview of Q2 Sales Figures of Auto Giants

For the April-June quarter, Toyota Motor (TM - Free Report) was the bestselling automaker in the United States, topping the perennial market leader General Motors (GM - Free Report) . The Japanese automaker posted sales of 688,813 vehicles, soared nearly 73% on a yearly basis. Besides, despite the thinnest of the inventories in the industry, the company’s June sales surged 39.8% year over year. While the three-row Highlander sales were up a significant 70.7% in June, the RAV4 was up a mere 5.7%.

Apart from Toyota, other Asian automakers achieving robust U.S. sales rise in June while shrugging off supply constraints include Honda (HMC - Free Report) and Hyundai. Japan-based auto bigwig Honda sold 486,419 vehicles, registering a year-over-year jump of 65.7%. Steered by record truck deliveries and strong car sales, the Honda brand set a new June sales record of 153,122 units, climbing 33.4% on a yearly basis. Similarly, Hyundai claimed its best-ever June sales in the United States, contributing to a breakthrough second-quarter sales. The South Korean automaker sold total 240,005 units during the quarter, up 69% year over year, while total June sales came in at 72,465 units, up 45%.

Meanwhile, the U.S.-based auto biggie General Motors delivered 688,236 vehicles in the United States in the second quarter of 2021, jumping 40% from the year-ago period and up from the 642,250 vehicles sold in first-quarter 2021. The second-quarter performance was driven by solid customer demand for pick-ups and SUVs but constrained by tight inventories amid the global semiconductor crunch. Moreover, during the quarter under discussion, sales elevated across all four General Motors brands — Buick, Chevrolet, GMC and Cadillac. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Further, during the quarter under review, Ford (F - Free Report) sold 475,327 vehicles, up 9.6% from the year-ago period. However, for June, the Dearborn-based automaker’s sales tumbled 26.9% on a yearly basis, with the F-Series sales dropping nearly 30% compared to June 2020. This was due to the global shortage of semiconductor chips which caused significant production cuts and inventory constraints for the auto biggie.

As for the America-Italian carmaker Stellantis (STLA - Free Report) , it delivered 485,312 vehicles in the second quarter of 2021, up 32% on a yearly basis, driven by robust consumer demand for Jeep, Ram, Dodge, Chrysler and Alfa Romeo brand vehicles. The Jeep brand managed to remain in the black, with a 19% year-over-year increase in total sales, marking its second-best ever second quarter for the U.S. retail sales. Sales of the popular Ram brand were 187,750 vehicles, up 47% on a year-over-year basis.

Encouragingly, German auto giant Volkswagen (VWAGY - Free Report) reported a 72% year-over-year jump in sales, backed by big volume leaps from both of its Atlas variants. Nissan (NSANY - Free Report) reported a significant rebound in the second quarter, with sales shooting up almost 74% for its core brand and 11% for the luxury division Infiniti. Likewise, Mitsubishi had a terrific second quarter with sales up a whopping 106% year over year.

Road Ahead

While U.S. car sales continued to rise at a blistering pace in the second quarter, the lean inventory at dealerships are tempering the pace of the auto industry’s recovery even as pandemic-weary car buyers are keen to buy new cars. The only silver lining in the current scenario is the underlying strength of consumer demand, who are even willing to buy the more expensive vehicles, thus, drastically boosting profitability for both manufacturers and retailers.

Nonetheless, the ongoing semiconductor chip shortage is expected to hit revenues from the global automotive industry to the tune of $110 billion in 2021. Though the auto industry is predicted to hit its lowest peak in terms of inventory levels in July and August, with the flow of essential chips resuming back to normal from September onward, what lies ahead is very uncertain as many forecast that dealerships will not be fully restocked until 2023.

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