Automakers rally from pandemic low; SAAR hits 18.5M

Toyota Motor Corp., American Honda, Hyundai, Subaru, Kia and Mazda, behind light trucks and robust retail demand, posted sharply higher U.S. light-vehicle sales last month compared with April 2020, when the market bottomed out early in the pandemic, with showrooms and factory floors mostly shuttered.

And in the latest sign the market continues to run hot, fueled by stimulus outlays while mostly avoiding the impact of falling inventories from tight chip supplies, the seasonally adjusted, annualized rate of sales for April was 18.5 million -- well above forecasts and a high for the month -- Motor Intelligence reported.

April marked the second month in a row the SAAR has topped 18 million.

Overall, industry sales rose 110 percent last month, analysts said. After April's record results, "the question now turns to whether we potentially run out of cars?," Morgan Stanley analyst Adam Jonas said in a report Tuesday, noting industry supplies hit a low of 33 days.

April volume jumped 183 percent to 239,311 at Toyota Motor, with the Toyota brand up 183 percent to 212,283 and Lexus advancing 177 percent to 27,028 -- April records for all three. The Toyota division said car, crossover and SUV deliveries more than tripled last month, with sales of the Highlander more than quadrupling to 27,679.

But Toyota Motor said U.S. car and light-truck inventories dropped to 205,285 at the end of last month, down 21 percent from March and 46 percent from April 2020, with the Toyota division beginning May with just a 19-day supply of light trucks.

Ford Motor Co. deliveries rose 65 percent, with SUV and crossover volume more than doubling and pickups rising 48 percent, while car demand skidded 21 percent with the discontinuation of every sedan. Sales at the Ford division rose 63 percent and Lincoln rose 115 percent, with combined retail deliveries at the two brands up 57 percent.

Ford said it ended April with gross stock of 265,000 light vehicles, or a 35-day supply, and warned inventory could drop by another 10 days.

April deliveries rebounded 171 percent at American Honda, the company said Monday, with volume jumping 165 percent at Honda and 226 percent at Acura. American Honda said record monthly light-truck demand at the Honda and Acura brands -- 98,828 units -- and a 125 percent increase in car deliveries helped it set an April sales record of 156,482.

The Honda brand also posted its best April ever on volume of 140,023.  Among the Honda brand's light trucks, the HR-V and Passport set monthly records, and CR-V and Pilot hit April highs.

Subaru also set an April sales record with 61,389 deliveries, a gain of 101 percent. But Jeff Walters, senior vice president of sales for Subaru of America, warned the company's future results "will be influenced by vehicle availability due to the well-documented chip shortages impacting production throughout the auto industry.”

Hyundai Motor Group, the parent of Hyundai, Kia and Genesis, has been largely untouched by a chronic shortage of semiconductors that has curtailed light-vehicle production worldwide, allowing the company to rebound strongly more than a year into the coronavirus outbreak.

A 146 percent rise in retail volume drove an overall gain of 128 percent at Hyundai, with total April deliveries of 77,523, the second straight monthly record for the company. Fleet shipments dropped 27 percent and represented just 3 percent of April sales, the company said.

A Hyundai Motor America spokesman said U.S. dealers had 123,046 cars and light trucks in stock at the end of April, off 13 percent from 141,425 when March closed and down 27 percent from 169,058 at the end of April 2020.

Volume in April jumped 121 percent to 70,177 at Kia, the company's second consecutive monthly record, and 309 percent at Genesis, with the GV80 SUV continuing to outsell combined volume of the luxury brand's three sedans.

Two cars – the new K5, a replacement for the Optima, and the Forte – set monthly sales records, and three crossovers -- Telluride, Sportage and Seltos -- set highs for April volume, Kia said Saturday.

"Given the showroom traffic our dealers are reporting ahead of the summer opening of the country we are confident our strong performance will continue through the year,” Sean Yoon, CEO of Kia Motors America, said in a statement.

April volume rallied 184 percent at Mazda and 186 percent at Volvo. The rest of the industry reports U.S. sales on a quarterly basis.

U.S. auto sales were forecast to nearly double last month to more than 1.3 million, according to analysts at J.D. Power, Cox Automotive and TrueCar, with strong retail demand continuing to drive volume, even as supply disruptions undercut volume.

The market bottom came early in the pandemic, with the seasonally adjusted, annualized rate of sales falling to 8.6 million in April 2020. After falling 14 percent in 2020, U.S. light-vehicle sales rose 12 percent in the first quarter, raising prospects the market would bounce back further in 2021.

But chronically tight semiconductor supplies have idled auto factories worldwide, crippling dealer stockpiles and clouding the outlook.

Some dealers and analysts say new-vehicle sales lost momentum late in the month as supplies continued to shrink. Cox Automotive said light-vehicle supplies fell by more than 1.25 million units during the month, a significant setback for an industry that counts on robust spring sales.

“The market is being driven by inventory right now, not incentives, and it is only getting worse as the chip shortage continues,” said Brian Finkelmeyer, senior director of new-vehicle sales strategy at Cox Automotive. “Most dealers are scrambling to secure inventory in any way they can. Those who aren’t paying close enough attention are losing out to those who are managing it more efficiently.”  

Dealers are selling a larger share of vehicles almost as soon as they arrive in inventory. In the first 10 days of April, J.D. Power said nearly one-third of vehicles were purchased within 10 days of arriving at a store, up from one-fourth of vehicles that were sold within 10 days in April 2019.

Charlie Chesbrough, senior economist for Cox Automotive, says the industry’s average days supply of vehicles -- 65 in an ideal market -- is on track to fall into the 30s soon.

Inventories are tightest – a 40-day supply or less – among large trucks and SUVs, midsize trucks, minivans and luxury SUVs, according to Cox Automotive data.

“There is little reason to expect buyer interest to wane anytime soon given recent economic growth, rate expectations and improvements to consumer sentiment,” Chesbrough said. “But inventory is a huge problem in the vehicle market.”

Discounts continue to fall as new-vehicle stockpiles dwindle. Average incentive spending per unit in April is expected to fall to $3,191, down from $4,953 in April 2020 and $3,573 in April 2019, J.D. Power estimates. TrueCar forecasts incentives will fall 28 percent to $3,191 in April. (See chart below.)

Falling discounts, tight supplies, strong consumer demand and an economy flush with cash from government stimulus programs have become a recipe for higher transaction prices. J.D Power estimates average transaction prices will rise 6.7 percent in April to $37,572, a high for the month, and the second-highest level after December 2020, when prices averaged $37,966.

• There were 26 selling days last month, the same as April 2020.
• The average number of days a new vehicle sat on a dealer lot before being sold was on pace to fall to 50 days in April, down 34 days from a year ago, J.D. Power estimates.
• Average incentive spending per unit on trucks and SUVs combined is expected to tally $3,173 last month, down $1,989 from a year earlier and off $445 from 2019, J.D. Power said. The average discount on cars is expected to be $3,219 in April, down $1,049 from a year earlier and a decline of $247 from April 2019.
• The average interest rate for new-vehicle loans in April was on track to increase 46 basis points to 4.3 percent from a year ago, J.D. Power forecast, and the first year-over-year increase since July 2019.
• Fleet deliveries are expected to total 154,400 in April, a gain of 81 percent from April 2020 and down 44 percent from April 2019. Fleet volume is expected to account for 10 percent of total light-vehicle sales in April, down from12 percent a year earlier, J.D. Power said.