Toyota, Hyundai, Kia, Mazda post double-digit gains as stockpiles keep falling

Toyota Motor Corp., Hyundai, Kia, Mazda and Volvo racked up another month of solid, double-digit U.S. sales gains in July, even as inventories continue to fall broadly across the industry because of severe microchip shortages and other supply-chain disruptions.

Sales rose 33 percent last month at Toyota Motor, with the Toyota and Lexus brands each posting similar double-digit gains. Overall, Toyota Motor said car demand increased 42 percent and light truck deliveries jumped 29 percent. 

The company said it ended July with 140,939 cars and light trucks in dealer and port stocks -- equal to a 17-day supply -- but down 13 percent from 161,120 at the end of June and off 47 percent from 266,131 at the close of July 2020.

Honda Motor Co., citing inventory constraints that limited key models, posted a smaller gain of 8 percent for the month, with demand up 7.4 percent at the Honda division and 14 percent at Acura. The company's car deliveries rose just 0.8 percent, with Accord off 4 percent. Still, American Honda said it set a July record for U.S. light-truck sales of 83,727.  

Volume rose 19 percent to 68,500 last month at Hyundai, with the brand's retail deliveries setting a July record of 61,227, a gain of 14 percent. Only three models -- Ioniq, Palisade and Veloster -- posted lower sales last month. Hyundai said it ended July with 46,113 cars and light trucks in U.S. dealer stock, down 65 percent from July 2020 and off 32 percent compared to the end of June.

Kia, with one of the lowest inventory levels in the industry, said deliveries rose 34 percent to a July record of 70,099.

For the second straight month, Subaru, citing low inventories caused by tight chip supplies, posted a decline -- 2.6 percent -- after a 21 percent decrease in June. 

At Genesis, volume rose 312 percent to 5,180, marking the first time the luxury brand has topped the 5,000 unit mark in a month. Genesis' two crossovers continue to easily outsell combined deliveries of the brand's three sedans. Mazda posted a 36 percent increase in July volume behind near equally strong crossover and car demand.

Volvo said its U.S. sales rose 20 percent last month. Ford Motor Co. is expected to report results for the month on Wednesday.

U.S. auto sales are forecast to rise 6 to 7 percent in July, Cox Automotive, J.D. Power and LMC Automotive say. But the annualized pace of sales is expected to drop to 14.7 million to 15 million after averaging just over 17 million a month in the first half, slowing the industry's post-COVID recovery.

New-vehicle inventories continued to shrink in July, with J.D. Power estimating dealers had 932,000 cars and lights trucks for retail sale late in the month, compared with 3.1 million in June 2019.

In July, more than 45 percent of vehicles were sold within 10 days of arriving at a dealership, up from 43 percent in June 2021 and up from only 26 percent in July 2019, Power said. The average number of days a new vehicle sits on a dealer lot before being delivered was on pace to fall to a record low of 31 days in July, down from 75 days a year ago, and down 6 days from last month, Power said.

Some dealers are promising faster deliveries if customers order a new vehicle. And some automakers are offering extra discounts if customers order a vehicle to be delivered later.

"Available vehicle supply has fallen every week since Feb. 15th," Cox Automotive senior economist Charlie Chesbrough said.

Barclays analyst Brian Johnson, citing low inventory and more planned factory downtime, last week cut his 2021 U.S. light-vehicle sales forecast to 16.3 million from 17 million amid increasing signs the stall in summer deliveries will extend into early fall.

In the latest sign the industry's supply woes are not abating, General Motors on Tuesday said its three North American large pickup truck assembly plants would be idled next week because of the global semiconductor chip shortage.

The factories in Flint, Mich.; Fort Wayne, Ind.; and Silao, Mexico, just resumed output following an earlier shutdown related to the chip shortage.

"The global semiconductor shortage remains complex and very fluid," GM said in a statement. "The recent scheduling adjustments have been driven by temporary parts shortages caused by semiconductor supply constraints from international markets experiencing COVID-19-related restrictions."

"This period will provide us with the opportunity to complete unfinished vehicles at the impacted assembly plants and ship those units to dealers," the company added.

With stockpiles falling and retail demand still strong, automakers and dealers continue to dial back on deals. Average incentive spending per unit in July is expected to fall to $2,065, down from $4,235 in July 2020 and $4,069 in July 2019, J.D. Power and LMC Automotive forecast. TrueCar estimates average incentives dropped 36 percent last month to $2,529 from July 2020.

Falling incentives and lower inventories are driving new-vehicle transaction prices higher, padding dealer profits. The average transaction price last month is expected reach an all-time high of $41,044, or 17 percent higher than July 2020, J.D. Power said.

• There were 27 selling days last month vs. 26 in July 2020.
• Kia tied Toyota for the lowest days' supply -- at 15 -- in July, Cox Automotive said.
• The new Kia Carnival minivan and Kia Telluride large crossover had single-digit days' supply – the lowest of all models across the industry, according to Cox Automotive.
• Incentive spending as a percentage of the average MSRP is expected to fall to 4.8 percent, down 5.5 percentage points from July 2020 and down 5.4 percentage points from July 2019, J.D. Power and LMC Automotive say.
• The average interest rate on a new vehicle was 4.5 percent in July, TrueCar said, and the average interest rate on used vehicles was 7.5 percent.
• Fleet deliveries will tally 132,000 in July, J.D. Power and LMC forecast, off 5.3 percent from June 2020 and down 36 percent from July 2019, on a selling day adjusted basis. Fleet volume is expected to account for 10 percent of total light-vehicle sales last month, down from 11 percent a year ago, as automakers prioritize retail over bulk orders.

"Looking forward to August, the dynamics observed in July are expected to continue. Inventory levels will not improve meaningfully in August and the sales pace will be depressed as many shoppers fail to find their desired vehicle. However, buyers who do find their desired vehicle will pay higher prices."

-- Thomas King, president of the data and analytics division at J.D. Power