U.S. new-car sales seen slightly higher in April, but tight inventories and rising prices will keep a lid on any big jumps

U.S. new-car sales are expected to rise slightly in April from March, but investors continue to fret that low inventories, skyrocketing vehicle prices, and few if any sales incentives will continue to crimp demand.

Estimates for April’s seasonally adjusted annual rate hover around 14.5 million vehicles, up from some 13.4 million vehicles in March but a far cry from April 2021’s SAAR of about 18.6 million vehicles, then a peak in a car-sales recovery post pandemic-related factory shutdowns.

“Sadly, no major signs of improvement to report in the new car market in April,” said Jessica Caldwell, an analyst with Edmunds.com. “We are seeing the same trends from Q1 carry into the second quarter: inventory continues to be very low, leaving consumers perturbed by high prices and little selection.”

The realities of the market are a “stark” contrast with auto makers trying to drum up excitement around this year’s EV launches, Caldwell said. Supply-chain issues, including chips and auto parts shortages, “are really putting a damper on the momentum and buzz of the market.”

Ford Motor Co.
F,
-2.20%
earlier Wednesday reported a 10.5% year-on-year drop for its April sales as sales of its pickup trucks faltered.

General Motors Co.
GM,
-0.93%
and Tesla Inc.
TSLA,
-0.87%
don’t report monthly sales but rather quarterly numbers, and are next expected to update markets on their production and deliveries in early July.

Investors have been concerned about potential demand destruction amid plummeting consumer sentiment in addition to the industry-specific hurdles.

The April sales data “reminded us that for the foreseeable future inventory/supply remains the primary constraint, as gross stock remains near an all-time low,” said Dan Levy with Credit Suisse.

Supply constraints eventually will ease, but “to unlock further sales, prices will need to decline somewhat from record levels,” Levy said.

Related: Tesla asks for more time to file proxy, foiling hopes of fresh look into Musk’s holdings

Rising car prices have been a boon to the U.S. auto industry, padding bottom lines, keeping 2022 outlooks of major U.S. auto makers intact, and taking some of the sting from higher raw-materials prices and costs.

Makers have also dialed down on sale incentives, and dealers report selling vehicles at or above the suggested sticker price, which had been unusual for years before the pandemic hit.

Ford last week vowed to be “as aggressive” as it can on pricing to fend off rising costs and Tesla and other makers have also raised prices.

Joseph Spak with RBC Capital said in a note Wednesday that Ford could decide to raise car prices more, including increases for the F-150 Lightning, the EV version of its best-selling pickup truck and a major weapon in Ford’s quest to pivot to making and selling mostly EVs.

“Management believes there is scope to take more, especially on (electric vehicles.),” Spak said, referring to recent meetings with Ford executives.

Don’t miss: Ford’s Rivian investment drags down Q1 earnings, and supply-chain challenges remain

“In our view, taking more price on BEVs may be necessary given battery metals inflation. There could be scope for Ford to raise price on the F-150 Lightning because the majority of interest is still reservations, not hard, configured orders,” the analyst said.

Deutsche Bank analysts, led by Emmanuel Rosner, said that April U.S. auto sales are coming in slightly ahead of their expectations. Tight inventories are expected to continue, they said.

By the end of April, industry inventories fell to 23 days, down one day from March and down 10 days year-on-year, “which could help maintain robust pricing conditions,” the Deutsche Bank analysts said.

The analysts kept their 2022 U.S. sales forecast at an annualized and seasonally adjusted 15.4 million vehicles, which banks on a “marked SAAR improvement” for the second quarter of the year.

Cox Automotive said Wednesday its team is still tallying April sales, but stood by initial projections that the month’s sales will be down more than 20% from the year-ago levels.

But that likely is more about last year’s sales than April sales, which might be considered “relatively normal if we consider the past year ‘a new normal’ for the industry,” Cox said.

Leave a Reply