U.S. Auto Sales Slump by More Than 14% Compared to 2021 Amid Chip Shortages, Supply Chain Issues

by TK Sanders

The American auto industry announced a slump in first-quarter domestic sales Friday as chip shortages and supply chain issues continue to plague the sector. U.S. auto sales forecasts from Cox Automotive, Edmunds, and J.D. Power/LMC Automotive said that first-quarter sales of cars, pickup trucks, and SUVs fell below 3.3 million. The industry was down more than 14 percent from the first quarter of 2021.

At a glance

  • U.S. auto sales suffered in Q1 due to supply chain issues and chip shortages
  • Electric vehicle sales continue to outperform expectations, but supply cannot keep up with demand
  • Currently, car dealers can only keep about 20 percent of their typical inventory on-site, which causes slowdowns in sales

The American consumer market seems ready to adopt electric vehicles and hybrids, as manufacturers like Hyundai saw triple-digit percentage surges in the sector year-over-year. Hyundai said electrified vehicle retail sales surged 241 percent in the January-March period from a year earlier.

“If gas prices remain high, that’s going to continue to push consumers toward green technology,” said Randy Parker, Hyundai’s senior vice president for U.S. sales.

But a hungry demand for any product only translates to healthy sales if supply can keep the pace; and automakers across the globe are struggling to source enough raw materials quickly and efficiently.

“Skyrocketing gas prices were top of mind for consumers in March, but the lack of inventory is what ultimately depressed new vehicle sales in the first quarter,” Jessica Caldwell, Edmunds’ executive director of insights, told Reuters.

The conditions are right for record auto sales once the supply chain corrects itself

Edmunds’ forecast calls for a 15.2 percent year-over-year decline in first-quarter auto sales. The company reported that inventories remain very thin, with just about three weeks’ worth of both gas and electric vehicles available. In the past, automakers typically kept enough vehicles in inventory to last two months or more. Caldwell also said that Russia’s invasion of Ukraine, as well as lingering COVID-19 effects, will continue straining markets as producers fight for a smaller supply of materials.

“Low unemployment, relatively low interest rates — the conditions are right for higher sales,” Cox Automotive’s senior economist Charlie Chesborough said. But, he said, sales will remain sluggish until retail lots can replenish inventories. “Make no mistake,” he added, “this market is stuck in low gear.”

According to the report, sales of some large SUVs and trucks held up despite the inventory pressure. General Motors reported rising sales of its Chevrolet Suburban, GMC Yukon, and Cadillac Escalade, during the quarter year over year. Still, though, GM said quarterly sales fell 20.1 percent to 512,846 units. Other auto companies fared similarly in terms of percent changes.

GM’s chief economist said in a statement that “ordinarily, a U.S. economy this strong would translate into [better sales].”