The U.S. auto industry has roared back from the pandemic, notching its strongest March sales in more than 20 years. But the widening microchip shortage now threatens to pinch supplies of many highly profitable and popular vehicles at a time when consumer demand is surging, according to Hannah Lutz in a report published by Automotive News.
First-quarter retail sales climbed 26 percent, according to J.D. Power, and total light-vehicle sales reported rose 12 percent from the year- earlier period that included the dismal first few weeks of the pandemic. Fleet deliveries are well below normal so far this year but could begin rising as the travel business rebounds in the months ahead.
“March is the month that we can really say, at least in the retail part of the vehicle market, we are now fully recovered. I couldn’t imagine saying that just a couple of months ago,” Jonathan Smoke, chief economist for Cox Automotive, said on Automotive News’ “Daily Drive” podcast. But, he added, “we’re probably going to see more acute problems with inventory over the next couple of months, through the second quarter, than we’ve seen so far.”
Automakers have been working to divert limited supplies of microchips toward production of their most important, fastest-turning models. Some have been partially building vehicles and parking them until enough chips arrive; General Motors modified some pickups to go without certain modules.
But with no certain end to the chip issue on the horizon, automakers soon could exhaust solutions for mitigating the shortage.
“The name of the U.S. car market this year is going to be about stock, production, supply,” Volkswagen of America CEO Scott Keogh said.
Inventories have fallen by 20,000 vehicles since mid-March and plunged to the lowest point since mid-January, according to Cox Automotive. Stockpiles industrywide are 21 percent lower than a year ago. GM’s inventory is just half the size it was a year earlier.
“If we get this under control in Q2, we can still recover a lot of that volume that was potentially at risk. But if it continues to move beyond Q2 and gets into Q3, more of that volume is going to become unrecoverable. That’s going to start putting more downward pressure on new-vehicle sales,” said Kevin Roberts, director of industry insights and analytics at CarGurus.
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