Welcome To Year No. 3

With “no meaningful improvement” in the supply of new cars and trucks for sale, U.S. auto sales are expected to fall about 15.6% in January vs. January 2021, according to a forecast from J.D. Power and LMC Automotive that was posted Jan. 26.

Analysts hope for some improvement in new-vehicle availability later this year, but those hopes keep getting deferred. An ongoing shortage of computer chips is holding back production, and therefore auto sales volume. New cars are heavy on computer chips, which are needed to run modern automotive electronics.

“We are nowhere near out of the woods,” with regards to the computer chip shortage, said Joseph McCabe, president and CEO of AutoForecast Solutions, in a recent webinar hosted by the New York-based International Motor Press Association.

McCabe says analysts expect some improvement to begin in the third quarter of 2022, “but that can move. It’s a very fluid conversation.”

U.S. auto sales are on a pace to reach 932,100 units in January, down from about 1.2 million a year earlier, the forecast from J.D. Power and LMC Automotive said.

For all of 2021, U.S. auto sales were 15 million. That was a 3.3% increase over 2021, but expectations had been much higher for 2021, compared with 2020. In 2020, pandemic-related business shutdowns hurt new-vehicle production, followed by a slow reboot in auto manufacturing.

That makes it two years in a row of low new-vehicle supplies relative to high demand. Low supply vs. high demand has had a predictable effect on new-vehicle prices.

The average new-vehicle retail transaction price in January is an estimated $44,905, the forecast said. December 2021 was a record $45,283. Average transaction price is a measure of what customers actually pay, taking incentives into account.

With low supply and high demand, the average incentive for January is expected to fall to $1,319, down 62% vs. January 2021, according to the forecast.

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