With 2022 auto sales, time for a gut check on the road to hell

In the musical Hadestown, the internal drama is at times told through The Fates. In other mythologies, the three old women determined human destinies.

Sadly, it appears that the future holds another painful year ahead for the auto industry. Certainly, many data points indicate that the industry is not on a road to recovery and may even be backsliding.

But my gut tells me things are going to get better and may not be as bad as they seem. As Hermes sings in the musical: "Maybe it will turn out this time ..."

But at the moment, it looks more like a road to hell.

Take the way that 2021 ended. It had originally looked like a really strong recovery year, until the chip shortage pinched supply and left the total size of the market little changed from 2020.

Worse even: The selling rate continued to fall, stumbling across the finish line.

December's SAAR — the seasonally adjusted annualized rate of sales — slid to 12.7 million. It was the second-worst sales pace of the year.

But actual vehicle sales didn't fall: More than 200,000 more cars and light trucks were sold in December than in November.

The "slowing" was a product of seasonal adjustments.

December is usually one of the top sales months as businesses look to finish the year strong or simply to limit the number of vehicles on hand that immediately lose value when the new calendar on the wall matches the model year on the window.

Because December sales are usually a lot higher than November's, that difference is built into the seasonal adjustments.

It only makes sense: Months are not created equal. One million light vehicles sold in December would be a disaster. But in February? Not so bad.

The Bureau of Economic Analysis examines monthly results over a period of years to determine how much weight to give each month. Those monthly adjustments then get recalculated each summer.

I'm not against seasonal adjustments, but when the reality on the ground is not following the patterns of the past — say, because of a pandemic or a supply crisis — those adjustments may just not be as relevant as in normal times, and a more complete look may be less dispiriting.

Depending on your perspective, it's also pretty discouraging that the outlook for the coming year is for very modest growth: to at best about 15.5 million from 15.1 million last year.

With most plants back in operation, I have a hard time believing that production is going to remain as constrained as it was in 2021. But a lot of the folks making these forecasts have a lot more information than I do.

While some of them may be motivated to set low expectations, it isn't very likely that every automaker, supplier, analyst and dealer is conspiring to lowball the 2022 outlook.

And yet my gut tells me that those automakers and suppliers will find a way to recover much faster than folks expect. If nothing else, the reward for every additional vehicle made is so high that every company is going to be giving their all to make more and more pickups, crossovers and even cars.

Under that kind of pressure — when the chips are down — it's remarkable the kinds of solutions people come up with.

Not that long ago, automakers pumped out vehicles to keep their plants running efficiently, even though many plants and products would be lucky to break even.

Now every auto that can be made can be sold for a healthy profit — or an obscene one — so automakers are going to push their employees and their suppliers to get the dealers the vehicles that they and their customers desperately need.

But, OK, there's still a limited supply of automotive-grade semiconductors.

Even if my gut is a little right and U.S. sales rise by, say, a million light vehicles, it's still going to be far below the number that Americans would want to buy — and be able to buy.

From 2015 to 2019, U.S. light-vehicle sales averaged more than 17.3 million.

After two years of undersupplying the market by more than 2 million a year, the inventory is scarce and the used-vehicle stock has been picked over and snapped up, too.

This sustained imbalance between demand and supply is going to take years to resolve. And my experience covering this industry for more than two decades tells me that there's likely to be an ugly period of overcorrection along the way — possibly as soon as 2023 or 2024.

The industry may sing a sad song when per-vehicle profits come back down to earth.

Until that day comes, it may be hard times for consumers, and probably suppliers. But automakers and dealers can whistle a happy tune, while they're living it up on top.