Despite inventory woes, automakers post records as May sales soar

U.S. auto sales roared in May compared with a year earlier, when the coronavirus pandemic was in full swing, giving every sign that Americans are shaking off the global health crisis.

But record-low vehicle inventories — a direct consequence of the pandemic disruption — continued to drag on the industry as consumers struggled to find popular vehicles, including pickups.

Several automakers hit monthly sales records in May. For the seven automakers reporting results for last month, sales rose 37 percent from May 2020. In addition, five of those automakers even beat numbers from May 2019 — a sign that demand is back.

"May sales appeared to be strong but probably left many automakers wondering what would have been if inventory were more plentiful," said Jessica Caldwell, executive director of insights at Edmunds. "One thing that is working for automakers and dealers is that Americans are ready to spend money and want to buy cars."Most automakers no longer release monthly sales figures, but analysts said the overall industry posted strong results last month.

Morgan Stanley estimated last week that the market advanced 42 percent in May, and LMC Automotive pegged the gain at 43 percent.

The seasonally adjusted, annualized rate of sales came in at 17.1 million for the month, Morgan Stanley said, well above the 16.2 million to 16.7 million forecasts from various analysts. It was down from April's 18.5 million but far above the 12.1 million tallied in May 2020.

In a research note, Morgan Stanley attributed the strong demand to "greater than expected stimulus support in the first quarter, pent-up demand coming out of 2020, a stronger than expected U.S. economy ... record high used car pricing and favorable credit conditions that continue to support auto sales."

But analysts also noted some winners and losers, based partly on vehicle supply.

Ford Motor Co.'s May sales rose by just 3.7 percent, dragged down by a 29 percent drop in the automaker's F-Series pickup business because of chronically tight semiconductor supplies that have idled factories.

Among the reporting companies, only Ford and Subaru posted weaker results last month compared with May 2019.

In contrast, Hyundai brand's volume jumped 56 percent to 90,017 in May, setting a monthly sales record for the third consecutive month. The Korean automaker's results last month were also 36 percent higher than in May 2019.

Randy Parker, senior vice president of sales at Hyundai Motor America, credited the brand's product lineup, including the additions of crossovers such as the three-row Palisade. But Hyundai also has benefited from a better inventory picture than its competitors.

While Hyundai's vehicle supply fell 26 percent last month because of its blowout sales numbers, inventory stood at 26 days. By comparison, the industry stood at a 23-day supply at the end of May, according to Morgan Stanley's estimate, down from 33 days a month earlier and 61 days a year earlier.

"We're certainly not immune to the chip shortage, and we're just trying to fight our way through it," Parker told Automotive News. "Even though we had this huge sales month, our job now is to keep the supply chain moving and replenish the stock as quickly as possible."

One of the biggest performances in the industry came from Toyota Motor North America. Sales rose 47 percent in May compared with a year earlier, despite inventory that had fallen to a jaw-dropping eight-day supply for the Toyota brand and 12 days for Lexus after the big Memorial Day weekend.

The difference for Toyota right now "is throughput," said Bob Carter, executive vice president for sales at Toyota Motor North America. "We still have cars coming in."

Automakers as a whole have had to adapt from luring consumers into showrooms to scrambling to find vehicles for the ones already there. So far, they've done a pretty good job, said Tyson Jominy, vice president of data and analytics at J.D. Power.

"Over 33 percent of vehicles are turning in under 10 days," he said. "So while automakers are working to turn out as much supply as possible, dealers are working closely with consumers to get vehicles delivered nearly as fast as they're arriving."

There was also some good news last week for General Motors, which projected significantly better second-quarter results than previously expected on improving supplies of semiconductor chips and additional workarounds to deal with the shortage.

GM said it planned to complete, test and ship 30,000 Chevrolet Colorado and GMC Canyon midsize pickups that had been awaiting microchips by early July. It also said "production line efficiencies" at its heavy-duty pickup plant in Flint, Mich., would allow shipments to increase by about 1,000 a month starting in mid-July.

With inventories depleted following strong May sales, the selling climate is going to increasingly depend on automakers moving vehicles from factories to showrooms as quickly as possible and steering consumers into their second or third choices.

"The automakers that navigate this shortage the best will be able to walk consumers into available inventory if their first choice has sold out," said Caldwell. "The industry still hasn't hit the inventory bottom, which is likely to happen in the coming weeks."