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Transportation & Infrastructure

Auto sales slump in first quarter due to inventory shortages and improvement will be slow

Ford Maverick ad
Ford Motor Company
Glossy ads for new cars are tantalizing prospective customers, who can't find the cars on dealer lots

First quarter 2022 sales in the U.S. declined about 14% compared to the same period last year, as production of new cars continued to be hampered by multiple shortages of parts. 

The computer chip shortage remains a vexing problem for auto companies. New variants of COVID-19 are still causing temporary shutdowns of computer chip processing factories. And auto companies also find themselves in the relatively new position of getting in line, as computer chips become ubiquitous in all sorts of consumer products.

Now, the Russian invasion of Ukraine is causing shortages of key materials produced in those countries.

The result is slowdowns and temporary shutdowns of assembly lines at new car factories, and significant inventory shortages on dealer lots, with many customers in Michigan and across the country facing months-long waits for new cars.

Andrew Port, an Ann Arbor resident, said he's still waiting on the VW ID.4 he ordered in October.

"They have no idea when it will be available, because of supply chain shortages linked to the war on Ukraine," he said. "Which means I have to keep on extending my current lease."

Because new cars are so hard to find, newer model used cars are selling for high prices - sometimes for even more than they were worth new.

Ann Arbor resident David Lupu said he was offered more money for a used car than he'd paid for it (new) the year before. "I passed on the sale because it would be so hard to get another," he said.

Michelle Krebs, an executive analyst with Autotrader, said her group has lowered its initial forecast of 16 million new cars sales in the U.S. in 2022 to 15.3 million.

"Because we just don't see the inventory situation improving much," she said. "And even to hit the 15.3 million mark, we're going to have to see a lot of improvement in supply the second half of the year."

Two companies in particular stand out for their ability to manage production and inventory issues, Krebs said - Tesla, and Toyota.

She said Toyota has been particularly efficient in its delivery system, to make sure its dealers across the country have been able to meet as much customer demand as possible.

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