Today, NADA issued its analysis of U.S. auto sales and the economy following the second quarter of 2021.
In the second quarter of 2021, sales totaled a 17.0 million unit SAAR, up slightly from the 16.9 million unit SAAR in the first quarter of 2021.
“The increased SAAR in Q2 was due in part to incredibly high sales in April 2021, which had a SAAR of 18.8 million units, the fourth highest monthly total since the year 2000,” said NADA chief economist Patrick Manzi. “I suspect that if inventory was not constrained, we could have seen an even higher level of sales.”
Through the second quarter, light-trucks, including crossovers and sport utility vehicles (SUVs), represented 76.9% of all new vehicles sold and the segment is expected to continue to move towards an 80% market share. Pickups accounted for 17.6% of sales for the first half of 2021, down from 20.0% compared to the first half of 2020; crossovers represented 45.9% of sales, up from 41.8% one year ago.
Inventory, due primarily to a global microchip shortage, remains a major factor in all facets of the auto retail industry. As of June 28, 2021, 4.6 million vehicles have not been produced globally as a result of the chip shortage and an additional 1.2 million losses are projected for a total of 5.8 million vehicles not produced, according to Auto Forecast Solutions. In North America alone, 1.5 million vehicle losses have been announced with an additional 300,000 projected for a total of 1.8 million units.
As a result, inventory levels were just over 1.5 million units at the end of May, which translates to 25 days of supply, down from 2.6 million units and a more normal 61 days of supply at the end of May 2020. According to Wards Intelligence, inventory at the end of June was depleted further and fell to 1.4 million units. By the end of the July, inventory is expected to fall an additional 7% to 1.3 million units.
“Inventory is likely to be tight into 2022 as manufacturers continue to deal with the impact of the chip shortage for the remainder of the year,” said Manzi. “Even if there is enough production to satiate current retail demand, there are still plenty of fleet customers looking for inventory whose needs will need to be met before manufacturers can begin to restock dealer lots to more normal levels closer to three million units.”
In light of strong demand a short supply of vehicle inventory, new-vehicle average transaction prices reached record highs at the end of second quarter with many vehicles selling at MSRP or higher. In June 2021, the new-vehicle average transaction price is expected to reach a record high of $40,206, according to J.D. Power.
High trade-in values and low interest rates have helped consumers with the new-vehicle price increases and have kept average monthly payments from rising greatly. In May 2021, the average monthly payment for a new vehicle finance contract was $598 compared to $576 in May 2020.
Manufacturer incentives on new vehicles remain limited. According to J.D. Power, average incentive spending per unit in June 2021 was $2,492 per unit, a decrease of $1,857 and $1,474 in June 2020 and June 2019, respectively. June 2021’s average incentive spending was the second lowest on record for the month of June.
At the macro level, Real GDP in the second quarter of 2021 is expected to grow by 8.6% on an annualized basis. The U.S. economy is expected to return to its pre-COVID level of real GDP of around $19.2 trillion by the time final data is collected. For all of 2021, real GDP is expected to increase by around 7%.
Initial jobless claims continue to fall each week and are headed toward pre-pandemic levels; however, approximately 14.7 million Americans continue to receive at least some type of unemployment benefits, down 54% compared to the same period in 2020.
In June, the labor market surpassed expectations by adding 850,000 jobs. The U.S. labor market has added back roughly 70% of the jobs lost due to the coronavirus pandemic, but an estimated 6.8 million jobs have not yet been recovered. At franchised new-car dealerships, employment has improved; at the end of May 2021, franchised dealership employment was 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 or 2022 as the economy continues to recover from the COVID global health crisis. No anticipated interest rate increase until 2023 will serve as a positive tailwind for new- and used-vehicle demand for the next 18 to 24 months.
Read the full June 2021 NADA Market Beat report.