US Auto Sales Stuck in Low Gear, Holiday Sales Push Unlikely

Supply-chain disruptions continue to cripple the auto market as evident from the U.S. vehicle sales data for the month of November. While demand for vehicles remained exceptionally high amid preference for personal mobility and robust consumer spending, limited vehicle supply amid chip crunch and high prices owing to tight inventories kept a lid on sales volumes.

While many auto biggies no longer release monthly sales data, most of those that report have witnessed a year-over-year decline in sales volumes. Japan’s auto giants Toyota TM and Honda HMC posted sales declines for the fourth straight month. Other Japan-based carmakers like Subaru Corporation FUJHY and Mazda Motor MZDAY saw their sales skid for the sixth and third consecutive month, respectively, in November. Sales fell for the fourth straight month for the South Korea-based firms Hyundai and Kia. U.S. auto biggie Ford F was a clear outlier, with sales rising around 6% year over year.

Delivery Numbers Snapshot

Toyota’s sales dropped 25% year over year to 153,593 vehicles. Sales at its namesake brand plunged 24.3% to 134,597 units, while Lexus division sales declined 32.3% to 18,996 units. While truck sales were down 15.6%, car sales tanked 46.1% in November. Volumes for RAV4, Highlander and Tacoma models were down 14%, 13% and 21%, respectively.

Close peer Honda witnessed a 17.1% sales slump year over year to 85,055 units. Sales were down 16.6% for the namesake brand and 21.2% for the Acura division. While truck sales slipped 13%, car sales contracted 24% in November. Most of the popular Honda models witnessed double-digit declines. For instance, sales of CR-V and Civic tailed off 19% and 26%, respectively.

Subaru recorded a sales decline of 34.5% in November to 33,045 vehicles. The company’s best-selling models like Outback, Crosstrek and Forester plummeted 19%, 51% and 70% year over year.

Mazda’s sales dwindled 5.3% year over year to 20,602 units last month. While truck sales inched down 0.3%, car sales tapered off 24.8%. Sales of all models fell except CX-9 and CX-30.

While Toyota, Mazda and Subaru carry a Zacks Rank #3 (Hold), Honda is Ranked #5 (Strong Sell) currently.

On the brighter side, Ford’s sales increased 5.9% year over year to 158,793 units in November. Truck and SUV sales were up 4.6% and 20.8%, respectively. While sales of the namesake brand rose 7.6%, that of Lincoln fell 23.4%. With the sales of F-Series up 14.6% year over year last month, the model is on its way to witness the 45th straight year of truck leadership.

Sales of Ford’s Mustang Mach-E totaled 3,088 in November, with 24,791 vehicles sold so far this year. To date, Mustang Mach-E is the country’s second top-selling all-electric SUV. Ford currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

US Vehicle Sales Unlikely to Finish 2021 on a High

The seasonally adjusted annual rate (SAAR) hit a 2021 high of 18.5 million in April but the global chip crunch and tight inventories have marred the levels for the past few months. SAAR is expected to have declined to 13.4-13.7 million light vehicle units in November. LMC Automotive anticipates the SAAR reading to hover around the same levels in December as well.

While the holiday season is upon us, tight new-vehicle stockpiles are not likely to offer the usual year end push to sales volume. Quoting JD Power analyst Thomas King, "The traditional year-end sales push will be somewhat non-traditional."

Owing to the chip deficit and associated production challenges, vehicle demand-supply balance has been severely disrupted. The industry is struggling with low inventory. Retail inventories remained below 1 million units in November for the fourth straight month, per J.D. Power and LMC Automotive. Japan’s biggest automaker, Toyota, notified that it had an 18-day supply inventory of 116,638 cars and light trucks as of November end, down 67% from 349,639 units in the year-ago period.

Per JD Power, “The average number of days a new vehicle sat on a dealer lot before being sold was on pace to fall to 19 days, a record low and down from 48 days a year ago.”

Shortage of semiconductors has indeed proven to be a major speed-bump for automotive production and sales. The emergence of the Omicron variant further raises concern. In light of the current situation, carmakers and dealers will have a tough time in rapidly restoring inventories and meeting the mounting demand for vehicles.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.

Also, with prices going through the roof owing to supply-demand mismatch, customers might just not be willing to pay a heavy premium to get their hands on vehicles of their choice.  While the demand for vehicles remains high, consumers might just be waiting on the sidelines amid limited choice and high prices.

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