The Empty Space Between Cars on Dealer Lots is Growing
April 26, 2021— In January, a survey was taken of industry economists when the seasonally adjusted annualized rate of sales (SAAR) for light-duty vehicles had been flirting with 16 million vehicles for the better part of six months. At the time, few experts forecast 2021 U.S. sales above 16 million vehicles. The sales momentum from December that carried over to January looked to stall in February due to severe winter weather. So, no one was expecting a SAAR of 17.8 million in March, a 55% increase from last year’s 11.4 million vehicles.
Bolstered by the strong performance in March, LMC Automotive (LMC) has since revised upward its full year 2021 forecast to 16.6 million vehicles, a 14% increase over the prior year. Only three months earlier LMC’s forecast sales were less than 16.0 million. First quarter sales results have restored some general confidence in the market but it comes with a warning. Economists caution there is the continuing risk of infection from the virus, there is lingering unemployment on a par with the Great Recession, there is a lack of vehicle inventory due to lost production days, and there is a growing scarcity of semiconductors caused by kids with too much free-time playing too many video games. Slowly, people are being vaccinated, kids are going back to school, and production of vehicles has resumed. But, the empty space between cars on dealer lots just keeps increasing. At the end of March there were only 2.4 million new vehicles on dealer lots, representing a 39 days’ supply at current sales levels. The current days’ supply is less than half what it was one year ago and dangerously below the industry standard of 60 days.
A recent conversation with Kelly Stumpe, aka “The Car Mom”, revealed dealers are doing whatever possible to make it look like there is more inventory than there really is. Observe, says Stumpe, how dealers are parking cars on random angles and inviting employees to park their cars on the lot; parents reading may be reminded of how children spread food around a plate so they can have dessert. But you can’t fool The Car Mom. Stumpe is advising moms to do their research in advance and be prepared to buy if they find what they want. Locating large SUVs with the appropriate seating configuration and options to keep your family comfortable and safe is increasingly difficult. The availability of used vehicles is no better. With tax refunds and a new round of stimulus checks in hand, consumer confidence continues to ride high going into the spring selling season. Stumpe hopes the manufacturers will consider building more base model vehicles that require fewer of the precious semiconductors and less of the precious time to assemble so that maybe more cars can get on the road.