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NADA Issues Third Quarter 2021 Auto Sales Analysis
TYSONS, Va. (Oct. 13, 2021)—Today,
the National Automobile Dealers Association (NADA) issued its analysis of U.S.
auto sales and the economy for the third quarter of 2021 and provided insights
into auto sales for the remainder of the year.
“The biggest story this year in the auto industry
has been the semiconductor microchip shortage, which has severely impacted
vehicle production throughout the globe,” said NADA chief economist Patrick
Manzi. “Supply chain disruptions have limited new vehicle production which has
translated into less vehicle inventory on dealer lots, and restricted new
At the end of the third quarter, new vehicle inventory
in the U.S. was just under a million units or approximately 24 days of supply—a
65% decrease from the start of 2021. In contrast, at the end of the third
quarter in 2020, inventory was at 2.7 million units or a 50-day supply. Suppressed
inventory levels are unlikely to change significantly before the end of the
year and will continue into 2022.
Reduced inventory, while not a limiting factor
earlier in the year, has slowed new vehicle sales in recent months. The
September SAAR fell to 12.2 million units, only 100,000 units above the SAAR
observed in May of 2020 when the U.S. remained under COVID lockdowns. In the
third quarter, the seasonally adjusted annual rate (SAAR) of sales declined to 13.3
million units, down significantly from the second quarter 2021 SAAR of 17.0
million units. After sales peaked in April 2021 at a SAAR of 18.3 million units,
one of the highest monthly SAAR rates this century, new vehicle sales declined
each month in the third quarter as the microchip shortage continued to impact
new vehicle production and inventory levels.
While sales were down for new vehicles as a whole
due to inventory, battery electric vehicle (BEV) sales totaled 300,635 through the first nine months of the year, an
increase of 91.3% compared to the same time in 2020. BEVs still represent a small
number of the vehicles sold at franchised dealers and represent 2.6% of all new
vehicles sold year to date in 2021, up from 1.5% compared to same time period
in 2020. Franchised auto dealers hit a milestone related to
BEV sales: from 2012 to the end of the third quarter 2021, franchised
dealerships have sold 501,507 new BEVs. NADA anticipates franchised dealers will
capture a greater share of BEV sales as new electric vehicle products come to
Given supply limitations in the
auto industry, NADA has reduced its new light-vehicle sales forecast from 16.5
million to 15.2 million units.
From a pricing standpoint, the
average new vehicle transaction price reached
$42,921 at the end of the third quarter, according to J.D. Power, while the
average monthly payment for a new vehicle finance contract reached $655. Manufacturers
have had to discount new vehicles less given this tight market. Average
incentive spending per unit fell to $1,793 at the end of September, a record
low. Tight new vehicle supplies coupled with lower discounts have been the
major drivers of increasing new vehicle transaction prices. However, high
trade-in values and low interest rates have helped consumers mitigate these
increasing vehicle prices.
With limited new vehicle
inventory available, many consumers have turned to the used market for their
vehicle needs, which has pushed wholesale auction and retail prices to records
in the summer. According to the Manheim Used Vehicle Index, used vehicle
wholesale prices hit a new record high at the end of the third quarter 2021, up
27% compared to the same period in 2020. At the end of September 2021, average
used vehicle transaction prices at franchised dealerships were up 20.1%
compared to September 2020, according to J.D. Power. Used vehicle wholesale and
retail prices will remain elevated until new vehicle inventory levels increase
and move closer to pre-pandemic levels.
At the macro level, Real GDP in
2021 is expected to grow by 5 to 6% on an annualized basis, and approximately
5% in 2022.
labor market, 194,000 jobs were added to the economy in September 2021; well below
expectations, but estimates for previous months were adjusted, indicating more
jobs were added than initially estimated. The number of unemployed persons per
job opening has fallen from 5.0 at the height of the pandemic in April 2020 to
0.8 unemployed persons per job opening at the end of July 2021. As of the end
of July 2021, there were a series high of 10.9 million job openings across the
U.S.; however, the U.S. labor market still employs 5.0 million fewer people
than before the COVID pandemic.
At franchised new-car dealerships,
employment has remained steady at 1.08 million workers. Like many other
industries, some dealerships have struggled to find workers to fill roles due
to strong labor demand nationwide.
Related to interest rates, NADA
sees no move by the Federal Reserve in 2021 through 2023 as the economy
continues to recover from the coronavirus pandemic; however, inflation remains
a point of conversation for economists. The Federal Reserve has signaled that
they will tolerate periods of above target inflation, slightly above 2%, as the
economy recovers from the global health crisis. NADA anticipates that inflation
will measures will top 4% for all of 2021.
“While COVID is still in the driver’s seat, the
U.S. economy continues to show signs of recovery,” said Manzi. “The biggest
obstacle for the auto industry moving into the fourth quarter and for 2022 will
be rectifying supply chain disruptions to restore new vehicle production and
Read the full September
2021 NADA Market Beat report.