Cars remain scarce. Buyers getting scarce, too

The dog days of summer drag on for the auto industry, unable to find respite from a withering supply chain crisis that has left assembly lines limping and dealership lots bare.

July was on track to be the ninth consecutive month that U.S. retail inventories closed below 900,000 vehicles, J.D. Power said.

And the industry's doldrums could extend into fall and beyond amid softening demand in a slowing U.S. economy.

"Rising interest rates and low consumer sentiment are keeping many potential buyers out of the market," Charlie Chesbrough, senior economist at Cox Automotive, said. "[Meanwhile,] higher prices for both gasoline and vehicles are making affordability an even greater challenge."

But in the near term, tight supply "continues to be the biggest obstacle ... and there is little evidence of supply returning to normal," Chesbrough said.

The dearth of new inventory fueled double-digit sales declines for six of the seven automakers reporting for July.

Collectively, those automakers' U.S. sales skidded 15 percent from a year earlier, according to the Automotive News Research & Data Center. The group's sales for the year were down 19 percent.

Overall, U.S. sales fell 12 percent last month, vehicle forecaster LMC Automotive said. July marked the 12th consecutive month that volume has dropped year over year.

Retail sales remained under 1 million for the third consecutive month in July, LMC said.

According to Motor Intelligence, the seasonally adjusted, annualized sales rate in July was 13.5 million, down from 14.81 million a year ago and higher than June's 13.22 million rate. The SAAR has surpassed 15 million only once — 15.23 million in January — since June 2021.

LMC trimmed its 2022 U.S. light-vehicle outlook to 14 million, from 14.3 million last month, noting that "uncertainty is elevated" into 2023.

"A slowdown in demand is likely already underway, but masked by the lack of inventory," Jeff Schuster, LMC's president of global forecasting, noted. "We continue to expect a pullback in demand, but overall volume is not likely to result in lower levels, just lack of a pronounced recovery."

Jesse Toprak, chief analyst at Autonomy, doesn't expect a "full recovery" in industry sales for at least two years.

"Geopolitical risks are here to stay," Toprak said. "We are now watching the situation in Taiwan" where most of the world's chip production occurs.

Ford Motor Co. was the only reporting automaker to record a year-over-year sales increase in July.

Its U.S. sales surged 37 percent last month, with Ford division sales up 36 percent and Lincoln advancing 64 percent from a year earlier.

The Blue Oval's combined crossover and utility vehicle sales, driven by newer models such as the Mustang Mach-E, Bronco and Bronco Sport, soared 70 percent, while pickup volume climbed 27 percent. Ford said over half of its retail sales in July came from previously placed orders.

Sales slumped 21 percent at Toyota Motor North America last month, with sales down 21 percent at Toyota and 23 percent at Lexus. It was the 12th consecutive monthly decline for the Toyota division and Lexus' sixth straight decline.

But Toyota's two pickups bucked the brand's overall results, with Tacoma sales up 1.4 percent to 23,917 and Tundra volume surging 66 percent to 10,694.

"There's a lot of pent-up demand for pickup trucks right now, and the Tundras and Tacomas are flying right off the lot," Toyota division head David Christ told Automotive News. "We're in a pre-sold environment."

It's a similar story at American Honda, which saw July sales sink 47 percent, with Acura off 59 percent and the Honda division down 46 percent.

"We're selling vehicles as soon as they get off the truck," said Mike Kistemaker, assistant vice president of sales for the Honda brand. "The turn rate for CR-V, Civic, Accord and Odyssey are all at or above 90 percent."

Sales dropped 11 percent at Hyundai and 11 percent at Kia last month, mostly on weaker car volume. Only four Hyundai models — Accent, Santa Cruz, Tucson and Veloster — posted higher sales last month.

After a slight gain in June volume that ended 12 consecutive monthly declines, Subaru returned to the minus column with a 17 percent drop in July deliveries. Meanwhile, July volume tumbled 29 percent to 23,393 at Mazda.

Among luxury brands, Volvo reported a 41 percent drop in July volume, its biggest decrease in a stretch of 11 consecutive monthly declines.

But U.S. deliveries increased for the 20th consecutive month year over year at Genesis on July volume of 5,203, up slightly from 5,180 a year earlier.

The resilience of the supply chain crisis has some industry executives surprised.

"What's given me indigestion is just how long this supply chain environment is lasting," Toyota's Christ said. "Just when we think we are through it, it seems like something else happens."

According to LMC, the inventory crisis has cost automakers 1.65 million units of potential demand in the U.S. through July — nearly the equivalent of total new-vehicle sales in Canada last year.

Kia, Toyota, Subaru, Honda, Lexus, Porsche, Hyundai, Land Rover, BMW and Acura had the lowest stockpiles at the start of July, Cox Automotive said, while Ram, Volvo, Jeep, Lincoln and Audi had the highest inventory levels.

Toyota said it ended July with 104,790 vehicles in stock — 14,258 at dealerships and 90,532 in port or transit — for a 16-day supply.

Hyundai said it ended July with 14,784 light vehicles in U.S. inventory, down from 46,113 at the end of July 2021.

Mazda closed July with just 6,868 vehicles, or a six-day supply.

Honda said it still faces supply chain issues caused by COVID-19-related production interruptions, port congestion and the microchip shortage.

"We expect supply issues to challenge the industry through the end of the year and into 2023," Kistemaker said "It's a fluid situation."

David Phillips, Carly Schaffner and Larry P. Vellequette contributed to this report.