Sales, Sales and More Sales (but Not Many Vehicles)

Foley & Lardner LLP

Foley & Lardner LLPThe May 2021 sales figures are in, and they are good. The industry has to be careful comparing May 2021 to May 2020, but even with that said, sales are good.  As reported by Automotive News, the “seasonally adjusted, annualized rate of sales in May is forecast to come in at 16.2 million to 16.7 million.”  That is pretty robust all things considered. When compared with the prior year, some of that is certainly bounce back attributable to comparing sales to the early part of the pandemic.  But some of it is just huge sales.  For example, Honda set an all-time monthly record for sales in May.  Not for during the pandemic, all-time.  More Hondas were sold in May 2021 than in any month ever in the United States.

The sales numbers are especially impressive considering how few vehicles are built and available for sales.  As noted by J.D. Power, “Low inventories have still not yet had a material effect on aggregate sales results. While inventory is still the primary threat to maintenance of the current sales pace in the coming months, retailers, manufacturers and suppliers have been able to adapt to maintain the sales velocity this year.” As the Dashboard has reported on more than one occasion, supply chain issues continue to plague the industry. Of course, the low inventories and high demand has led to another benefit for the industry: high prices. The increased demand against reduced supply has led to high prices resulting in consumer pricing on vehicles setting an overall record: $53.1 billion.

The pandemic continues to impact the industry in various ways.  For example, Taiwan does not have enough vaccines to make sure that its industry stays open.  Industry observers can likely guess what gets made in Taiwan: microchips (among other things). A lot of microchips.  COVID and its variants can shut down the industry in more than one way and in more than one location. With supplies already stressed and vehicles flying off lots, the industry surge could turn around any time.

Moreover, while sales in the US are strong, this is a global industry with global markets.  And one of the biggest markets had a rough May. India reported a decline in domestic passenger vehicle sales in May compared to the prior month. Given the reported state of COVID in India, this is not particularly a shock. Conversely, China has seen thirteen straight months of increased auto sales.

Plainly, the pandemic is the economy in many ways. The more that COVID can be kept under control, the more that people will be out and spending money.  The more that COVID can be kept under control, the more that manufacturers will have the supplies that they need to make vehicles. 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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