Dealers are running short of cars to sell. While some models remain reasonably well-stocked, others have fallen to unheard-of lows. The shortage has pushed prices higher for almost every type of new car.
Inventories Were Already Low. Then They Fell.
Automakers measure their supply of cars with a metric they call “days of inventory” – essentially, how long it would take them to sell out of cars at the current sales rate if they didn’t build any more. A Cox Automotive analysis shows that, nationwide, dealers held an average of 35 days of inventory in mid-May. At the end of April, they averaged 44 – which analysts considered a very low number. Cox Automotive is the parent company of Kelley Blue Book.
The total supply of new vehicles available to sell nationwide fell 43% below last year’s level at the same time, and 54% below similar numbers from 2019, before COVID-19 lockdowns began.
New cars have been selling, meanwhile, at a record pace. In April, the seasonally adjusted sales rate – a figure that adjusts for normal seasonal fluctuations – hit its highest level since record-keeping began in 1976.
Some Brands Shorter Than Others
Toyota had the tightest supply among mainstream auto brands. Toyota dealers had an average of 18 days’ worth of cars to sell at mid-month. Among luxury brands, Lexus dealers had the shortest supply, at 23 days.
Some individual models fared even worse. Toyota dealers had just nine days’ worth of 4Runner SUVs left to sell. General Motors has less than 20 days’ worth of all of its large SUVs – the Cadillac Escalade and Escalade ESV; Chevrolet Tahoe and Suburban; and GMC Yukon and Yukon XL — in stock.
Many automakers have made a strategic decision to keep inventory levels low, but that doesn’t explain the current slim supply of vehicles.
Microchip Shortage Partly to Blame
A global shortage of microchips is driving much of the problem. New cars require dozens of these small processors, which control everything from engine valve timing to navigation systems.
But COVID-19 shutdowns, followed by worldwide consumer demand for personal electronics during the lockdown, left automakers unable to find the processors they need. That has led them to pause or slow the production of many popular models.
No End in Sight
Analysts are reluctant to speculate on an end date for the shortage. U.S. Commerce Secretary Gina Raimondo told reporters this week that the microchip shortage “will be a daily challenge” for “the next year or so.”
