Rebound rolls on but falling supply dings Ford, Subaru

Asian automakers racked up strong U.S. sales gains in June while largely shrugging off supply constraints caused by parts shortages, capping a strong second quarter as the industry steadily rebounds from the pandemic. But falling new-vehicle supplies dinged some companies -- notably Ford Motor Co. and Subaru -- and limited gains at other automakers, dealers and analysts say.

The seasonally adjusted, annualized rate of sales last month tallied 15.35 million, Motor Intelligence said, just within the range of forecasts -- 15.2 million to 16.4 million -- from TrueCar, Power/LMC and Cox Automotive. The latest SAAR reading is down sharply from May's 17.09 million rate as well as March and April, when the pace of sales topped 18 million – marking the industry's hottest 3-month stretch since 2005 -- but up from 13.23 million in June 2020 when the industry was stilling grappling with shutdowns early in the pandemic.

Ford said June volume slumped 27 percent, with the Ford division off 27 percent and Lincoln down 43 percent. Sales of the F-Series truck -- Ford's biggest seller and profit generator -- dropped 30 percent to 45,673 and are now off 1.5 percent for the year.

In a report this week, LMC Automotive estimates Ford lost more than 350,000 units of production in the first half because of semiconductor shortages that forced the company to temporarily close assembly plants.

And in a sign of the company's struggles, sales of the Chevrolet Silverado and Ram pickup topped the F-Series, the nation's top-selling model line for decades, in the second quarter. Overall, Ford Motor said car sales skidded 82 percent last month, reflecting discontinued models, while utility vehicle volume dropped 12 percent and pickups fell 27 percent. The company said Friday its gross inventory stood at 162,000 vehicles to start July, down from 187,000 at the end of May and 475,000 at the end of June 2020.

Overall, U.S. light-vehicle sales rose 17 percent to 1.297 million in June, LMC Automotive said Friday, with retail volume at 1.127 million and fleet shipments at 169,191 for the month.

Toyota, Kia, Hyundai and Genesis all tallied increases of 40 percent or more in a month marked by sharply lower incentives but higher transaction prices. June volume rose 33 percent at Honda Motor Co.

Companies that report on a quarterly basis surged, too. They include General Motors, up 40 percent, Stellantis, up 32 percent, and Nissan, up 68 percent.

In a historic shift, Toyota outsold perennial market leader GM after a 73 percent jump in the latest three-month period. And Honda Motor and Hyundai Motor Group outsold Ford Motor for the second month in a row – for the first time ever.

“The U.S. economy is accelerating, consumer spending is robust and jobs are plentiful,” Elaine Buckberg, GM's chief economist, said in a statement. “Consumer demand for vehicles is also strong, but constrained by very tight inventories. We expect continued high demand in the second half of this year and into 2022.”

In the second quarter of 2020, U.S. sales plunged 33 percent as the coronavirus kept buyers out of showrooms and forced the closure of assembly plants.

The leanest inventories in the industry didn't prevent Toyota from advancing 40 percent last month, with volume up 42 percent at the Toyota division and 29 percent at Lexus. The company received a big boost from car sales, up 57 percent, while light-truck demand increased 33 percent.

General Motors' second-quarter deliveries tallied 688,236. Volume rose 31 percent at Chevrolet, 50 percent at GMC, 86 percent at Buick and 55 percent at Cadillac. Still, Toyota Motor topped GM, the market leader for decades, in the second quarter by 5,116 cars and light trucks, though GM still leads year to date.

GM, which has idled multiple North American assembly plants this year because of the global microchip shortage, said it ended June with 211,974 cars and light trucks in inventory, down 37 percent from the end of the first quarter.

Toyota said it finished June with 161,120 cars and light trucks on hand, a drop of 38 percent from the end March and a decline of 41 percent at the end of June 2020.

At Stellantis, every brand but Fiat posted a gain in the second quarter, with volume up 19 percent at Jeep, 47 percent at Ram, 36 percent at Chrysler and 42 percent at Dodge.  The automaker said retail sales rose 27 percent during the latest period, with fleet accounting for 12 percent of volume, or about 58,237 units. 

At Nissan Motor, quarterly deliveries were spurred by a 74 percent gain at the Nissan division. Volume increased 11 percent at Infiniti. Nissan Motor received a bigger lift from car demand -- up 76 percent -- compared with light trucks, up 64 percent, during the latest three-month period.

June sales rose 45 percent to a monthly record of 72,465 at Hyundai, while deliveries jumped 43 percent to a June high of 68,486 at Kia. At Genesis, sales advanced 184 percent.

The three Hyundai Motor Group brands are benefiting from new and redesigned crossovers and other light trucks.

At Kia, light trucks accounted for 64 percent of all U.S. sales in the first half while crossovers now represent 55 percent of Genesis volume.

Kia said U.S. dealers ended June with a  roughly 15-day supply of vehicles. While the production pipeline is in-line with its annual plan, Kia expects sales to remain brisk and inventory to be tight over the next several months, a spokesman said.

Hyundai's retail volume rose 36 percent to a June record of 66,765. The company said it ended the month with 67,992 cars and light trucks in dealer inventory, down 25 percent from 91,249 at the start of the month.

Randy Parker, senior vice president for national sales at Hyundai Motor America, said close collaboration with dealers and manufacturing and supply chain partners has allowed the company to "successfully manage extraordinary consumer demand."

Subaru said June deliveries fell 20 percent while second-quarter sales still gained 18 percent. The automaker blamed the dip last month on low stockpiles caused by the microchip shortage.

“Given our inventory at this time, we were pleased with the June sales results our nimble retailers worked hard to deliver, and we thank them for their efforts,” Subaru of America CEO Tom Doll said in a statement.

Second-quarter volume rose 72 percent at the VW brand, 73 percent at Mazda and 106 percent at Mitsubishi.

Among luxury brands, BMW overtook Mercedes to lead in first-half sales.

Analysts at J.D. Power, LMC, Cox Automotive and TrueCar say U.S. light-vehicle sales were forecast to rise 16 percent to 20 percent or more in June from the year ago period, when the pandemic was still hobbling economic activity, though the sales pace cooled considerably from early and mid-spring on severe inventory shortages.

The rate of industry sales outpaced the replacement rate in March, April and May, and possibly June, Cox Automotive estimates. While the economy continues to recover from the pandemic, analysts say tailwinds from the latest round of government stimulus spending will slowly fade after peaking in the spring.

Many dealers say showroom traffic slowed in the closing days of June as new car and light-truck supplies continued to dwindle.

IHS Markit analyst Chris Hopson said while inventory pressures are being felt industry-wide and will slowly improve in the second half, ”there won’t be much relief realized in July or August.”

Even amid slumping stockpiles, some automakers continued to actively market new cars and light trucks last month -- a sign the severe semiconductor shortage, among other supply disruptions, has affected automakers to different degrees.

Hyundai pitched lease deals on the redesigned Tucson and Chevrolet dangled similar offers on the Equinox. Toyota advertised the RAV4 and Highlander crossovers, despite tight supplies in some markets. On the other hand, Ford Motor, hampered by falling stockpiles of key models such as the F-Series pickup, continued to offer $1,000 off on new-vehicle orders that will be delivered at a later date.

J.D. Power and LMC Automotive estimate average incentive spending per unit in June will fall to $2,492, down from $4,349 in June 2020 and $3,966 in June 2019. Spending as a percentage of the average MSRP is expected to fall to 5.8 percent, down 4.7 percentage points from June 2020 and down 4.1 percentage points from June 2019, Power said. TrueCar estimates June incentives will average $2,751, down 33 percent from June 2020 and off 10 percent from May. (See charts below.)

Average new car and light-truck supplies fell to 1.5 million units in June from 1.78 million in May, and remained 1.3 million units below June 2020 levels and over 2 million units below June 2019 levels, Cox Automotive said. And the industry's days supply of vehicle has dropped 61 percent year over year to just above 30 days, Cox said. Among brands with the lowest stockpiles in June were Toyota, Lexus, Chevrolet, GMC, Kia, Subaru, Honda and Land Rover, Cox said, while Alfa Romeo, Fiat, Genesis, Infiniti, Mitsubishi, Buick, Jeep, Ram and Audi had the highest stockpiles.

• There were 25 selling days last month, the same as June 2020.
• The average retail transaction price for a new vehicle in June was expected to reach a monthly record of $40,206 in June, J.D. Power said, up from the previous high of $38,539 set in May.
• Fleet sales, an ongoing weak spot in the industry, are expected to total 196,000 in June, up 89 percent from June 2020 and down 39 percent from June 2019 on a selling day adjusted basis, J.D. Power said. Fleet shipments are expected to account for 15 percent of June's U.S. light-vehicle deliveries, up from 9 percent a year ago, Power estimates.
• The average interest rate on a new vehicle in June was 4.5 percent, TrueCar said, and the average loan term on a new vehicle for June 2021 was 70 months.

"The chip shortage has complicated OEM operations in terms of shifting priorities around what vehicles to build and where to send them. Looking at the second quarter compared to first quarter, we see large shifts in market share with the biggest benefactors being Honda, Hyundai and Kia. Not all brands have been impacted equally, but the common denominator is that everyone wishes they had more vehicles to sell in the current environment."

-- Valeri Tompkins, senior vice president at TrueCar.

"Optimism last month has paused and the probability that a portion of the automotive recovery gets delayed into 2022 has increased. In addition, the likelihood that some of the 17 new or redesigned vehicles expected to start production in North America during the second half of the year are delayed or running at well below ramp-up levels is quite high."

-- Jeff Schuster, president of LMC Automotive's Americas operations and gloval vehicle foreacsts

  "The Fourth of July is going to look a little different this year compared to years past. Instead of being able to stroll into a blowout bargain barbecue event at a dealership, consumers should shop around for deals online beforehand and be ready to pull the trigger as soon as they find what they want. Shoppers who are flexible and have a trade-in are in the best position to secure the best deal this weekend. And given current lower interest rates, consumers might find the best incentives through lease deals rather than cash discounts."

-- Ivan Drury, Edmunds' senior manager of insights.