Car sales plunge as chip shortages choke off supply

By Chris Isidore, CNN Business

New car sales plunged over the last three months in the United States despite strong demand, as the shortage of computer chips and other supply chain issues caused shutdowns at auto factories and choked off the supply of vehicles.

General Motors reported sales fell a third from a year-ago last quarter, and they were off 40% from the same quarter of 2019 before the pandemic roiled the car market. Sales at Stellantis, the company formed by the merger of Fiat Chrysler and France’s PSA Group, fell 19% from a year ago, and 27% from the pre-pandemic period.

At Toyota Motor, which includes Toyota and Lexus, third quarter sales edged up 1.4% compared to a year ago. But that three-month total includes a 22% plunge in September sales. (The company breaks out monthly sales numbers, unlike GM and Stellantis.) While Toyota has reported fewer supply chain disruptions than other major automakers it, too, has had to cut back production at some factories more recently.

So all the automakers pointed to semiconductor supply chain disruptions and historically low inventories as a problem for sales.

“While the various supply chain issues facing our industry continue to impact available inventory, we know the demand for our vehicles is still there,” said Jeff Kommor, US head of sales for Stellantis.

The shortage of vehicles has also led to record-high prices for both new and used cars for much of this year, which has also been a drag on sales, as some buyers have been priced out of the new car market.

The auto industry has been dealing with a shortage of computer chips needed to build cars for more than a year. GM said it expects the situation will improve in the final three months of 2021, but earlier this year automakers had hoped things would have improved by this point. Instead, GM has been forced to temporarily shut production of most of its North American plants.

“The semiconductor supply disruptions that impacted our third-quarter wholesale and customer deliveries are improving,” said the nation’s largest automaker in a statement. “As we look to the fourth quarter, a steady flow of vehicles held at plants will continue to be released to dealers, we are restarting production at key crossover and car plants, and we look forward to a more stable operating environment through the fall.”

The computer chip shortage started when auto sales plunged in the early weeks of the pandemic, due to record job losses and the temporary closure of many factories and dealerships. Most automakers, expecting a prolonged downturn in sales, trimmed orders for computer chips and other parts. When sales rebounded much faster than anyone expected, the supply of chips had already gone to other customers.

While the automakers expected to be able to increase their supply of chips by the middle of this year, they were hit by outbreaks of Covid cases in other regions, such as Southeast Asia, where many of the chip plants were shut. And other supply chain issues, including an imbalance of shipping containers and congestion at the nation’s ports, a shortage of truck drivers and general labor shortages, started limiting supplies of other needed parts and raw materials.

Other automakers are due to report results later Friday or on Monday.

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