According to Cox Automotive, new vehicle sales are expected to fall 16% year on year in the first quarter, representing the second-worst quarterly total in a decade, trailing only the pandemic-affected second quarter of 2020.
“Make no mistake, this market is stuck in low gear,” Cox Automotive senior economist Charlie Chesbrough said. Auto makers are dealing with supply-chain disruptions that have pinched inventories, a dynamic that could worsen with the Ukraine war and Covid-19-related shutdowns in China, analysts say.
According to J.D. Power, sales are expected to slow in the first quarter to 12.7 million annually. In comparison, automakers sold just shy of 15 million vehicles in the United States last year, according to the firm, a slight increase from 2020. Prior to the pandemic, the industry had exceeded 17 million vehicles for five years in a row.
Because it eliminates seasonal factors, the industry tracks the annualized sales rate as a measure of market strength from month to month.
The majority of automakers are expected to report sales figures on Friday, with the exception of Ford Motor Co., which will report on Monday.
According to analysts, the sales slowdown is due to production rather than demand. Drivers are grabbing available vehicles as soon as they arrive on the lot. According to car-buying website Edmunds.com, 41 percent of all new vehicles were sold within the first week of sitting on a dealer lot in the first quarter of 2021, compared to 20 percent in the first quarter of 2021.
"No one is concerned about where their next sale will come from; they are concerned about where their next car will come from," said Paul Walser, former chairman of the National Automobile Dealers Association.
Edmunds predicts a 15.2 percent drop in first-quarter sales compared to the same period in 2021, with sales falling from 3.9 million to 3.3 million vehicles sold.
March is traditionally a busy month for the automotive industry, with increased promotions. Last year, the industry had a record-breaking spring, with sales approaching pre-pandemic levels.
Dealers and automakers continue to report strong earnings as demand for existing inventory of used and new cars drives up prices. According to J.D. Power, consumers are expected to spend $45.7 billion on new vehicles in March, the second-highest total for the month of March behind last year.
"Given the strong demand and extremely constrained inventory situation, it should come as no surprise that manufacturer discounts are at an all-time low, while prices and profitability set new highs for the month of March," said Thomas King, president of J.D. Power's data and analytics division.
According to Cox, the average new car price is around $44,700, with a total available inventory of 1.1 million vehicles, down 59 percent from the same period in 2021. According to the firm, the average used vehicle listing is $27,600, with 2.62 million unsold used vehicles available, a nearly 5% increase from March 2021.
Car leases are also in decline, having reached their lowest level since 2009. During the pandemic, average lease payments have risen as automakers removed incentives that typically make leasing a more affordable option, reducing the way many buyers enter the market.
Toyota Motor Corp. surpassed General Motors Co. in sales for the first time last year, owing to its decision to stockpile computer chips used in vehicle electronic systems. Following this historic shift, the first-quarter performance of the two global auto-making behemoths is being closely scrutinized, though a Toyota executive has stated that he does not expect it to last long.
"To be clear, this is not our goal, and we do not see it as sustainable," said Jack Hollis, Toyota's senior vice president of North American operations, in January.