The auto industry’s tight new-vehicle supplies and strong retail demand could extend almost another year because of ongoing inventory shortages and strong economic conditions, Toyota Motor North America executives said Wednesday.
A chronic shortage of microchips and other supply-chain disruptions that have forced automakers to idle assembly plants — in some cases for months — have upended the industry’s steady recovery from the COVID-19 pandemic.
J.D. Power and LMC estimated Wednesday that dealers currently have 932,000 vehicles in stock for retail sale, compared with 3.1 million units two years ago.
“It will take a little time — maybe into the second quarter of 2022 — before we see inventories start to stabilize to match demand again,” Bob Carter, TMNA’s head of sales, told reporters on a quarterly video call.
Toyota is keeping a close watch on spiking COVID-19 cases, which could further threaten production. However, Chris Reynolds, who oversees manufacturing in North America for TMNA, in addition to other duties, said Toyota hasn’t had any confirmed COVID cases over the last several weeks, and was moving ahead for now to allow employees who have been vaccinated to go maskless if they follow internal protocols. But, he cautioned, that could change rapidly.
“We thought things were starting to turn for the better, but this is affecting everybody, Toyota included,” Reynolds said. “It goes to show that you can never let your guard down, and things are subject to change. It’s the virus that runs the show here; I wish we did.”
J.D. Power, LMC and Cox Automotive said this week U.S. industry sales will rise 7 to 8 percent in July over July 2020, but estimate the annualized sales pace will continue to fall, to 15 million in July, after hitting 18.69 million in April and averaging 17 million a month in the first half.
Toyota and Lexus dealers are struggling to keep up with what Carter called the strongest retail demand he has ever seen, and said the automaker began July with only about 38,000 new cars and light trucks in dealer stocks, or just a six or seven-day supply. He said the company expects to end the month with Toyota sales in excess of 185,000 and Lexus tallying over 30,000 deliveries.
“We’re seeing trucks coming into our dealers carrying nine vehicles, and eight of them have consumer deposits on them,” Carter said. “Preselling is becoming a very, very big part of the industry. Consumers’ preference is still to have every color available to them side-by-side on the lot, but that’s not the situation we’re in right now.”
Carter said the Japanese automaker is still predicting industry sales of 16.6 million vehicles in 2021, despite what he said are ongoing production constraints that are likely to get worse before they get better as the Delta variant of COVID-19 spreads. Carter also said that the fact that Toyota outsold General Motors in North America during the second quarter was likely “a moment in time” and “not a sustainable position” for the Japanese automaker.
“We have our plans, and we will work our plans,” Carter said, adding that consumer demand so far hasn’t been deterred by rising prices in dealerships. “I don’t see any black clouds on demand over the next 60 to 90 days.”