New Vehicle Sales Plunged Further in August amid Inventory Shortages & Production Cuts: Chip Shortage Wreaks Havoc

The average transaction price for new vehicles spikes to $41,000.

By Wolf Richter for WOLF STREET.

It has been one heck of a year so far for automakers, with sales surging early in March and April to very high levels, only to get smacked down brutally by the inventory shortages that resulted from the semiconductor shortages that were triggered by the record mind-blowing spike in sales of durable goods more broadly and in the US in particular. All year, automakers have been announcing what now seems like an endless series of temporary plant shutdowns ricocheting around the globe. Vehicle production, now prioritizing high-end and high-margin models, has plunged. Inventories are picked-over, and inventories of popular models are depleted.

Total car, truck, and SUV sales in August dropped for the fourth month in a row, to 1.28 million vehicles, according to the Bureau of Economic Analysis, down from 1.6 million in March when there were still enough new vehicles to sell.

The Seasonally Adjusted Annual Rate (SAAR) of sales, the standard industry measure which adjusts for the number of selling days per month and for seasonal factors, and then converts it to what sales would be for an entire year, plunged by 23.4% from August 2019, to 13.1 million SAAR, the lowest, beyond the lockdowns, since September 2011 when the industry was digging out from the Great Recession that threw GM and Chrysler into bankruptcy:

During the Great Recession, what caused the collapse in vehicle sales was a collapse in demand, as new vehicles were piling up by the millions at ports and on storage lots.

This time around, what caused the plunge in sales is the collapse in inventories because the industry is short on chips, and components that contain chips, which nearly all components do. Plants cannot assemble the vehicles when one or two parts have gotten hung up and are missing.

New vehicle inventories on dealer lots have been dropping from record low to record low over the months, and in August, according to the National Automobile Dealer Association (NADA), fell another 5% to a new record low of 1.06 million vehicles.

This amounts to a supply of about 25 days at the current rate of sales, when 60 days’ supply is considered healthy.

In reality, with popular models, there is essentially no inventory, with all units being either pre-sold to customers before the units arrive, or being sold to customers as the units come off the vehicle carrier.

As automakers are prioritizing high-end vehicles, and as they’re cutting incentives, the average transaction price (ATP) keeps surging. In August, the ATP reached $41,000 according to J.D. Power estimates, supported also by trade-in values that have spiked by 70% year-over-year, reflecting the mind-boggling price spike in used vehicle wholesale prices and higher-end trade-ins.

This chart shows the ATP for June and December each year, plus for August (green) 2021:

Plant shutdowns keep getting announced, and the semiconductor shortages keeps getting extended, not because semiconductor production is down – on the contrary, semiconductor production started hitting records in May. But it’s not enough to meet soaring demand for chip-loaded durable goods, from laptops, cellphones, exercise equipment, and appliances to automobiles.

In addition, several semiconductor plants that produced chips for the automotive market where shut down earlier this year due to various calamities: A plant in Japan for over two months due to a fire; and three plants in Austin, two for nearly a month and one for over a month, due to the Big Freeze that hit Texas. These shutdowns added to the backlog.

For example, Ford reported that total sales, including fleet sales, plunged 33.1% in August year-over-year, to just 124,176 vehicles. Retail sales plunged by 40%, with pickup truck retail sales down 36%, SUV retail sales down 30%, and car sales down 85%. Ford sold just 2,369 — nearly all of them Mustangs — having abandoned sedan sales to the Japanese, German, and Korean automakers.

GM and Stellantis’ US brands have also abandoned sedan sales to the foreign automakers. These foreign automakers are still selling sedans, but they also face the shift in what Americans want to buy, which is SUVs, including compact SUVs, pickup trucks, and some vans. Sedans are out — a process that started in 2014 and that I have called Carmageddon since 2017:

Ford’s harsh declines were due to production cuts and the resulting inventory shortages. Back in April, Ford announced that it could lose 50% of its production globally in Q2 due to the chip shortages.

Now is Q3, and the production cuts continue. At the end of August, Ford said that production of its bestseller, the F-150 truck, would get further hit by temporary plant shutdowns and shift eliminations. The assembly plant that makes its crossover SUVs in Canada would also temporarily shut down.

Desperate customers, willing to pay whatever, are switching to ordering from Ford and waiting patiently for the order to get built, rather than picking through what’s left on the dealer’s lot. Retail orders in August quadrupled compared to a year ago, to 41,000 new orders. Nearly one-third of retail sales in August came from deliveries to customers who had ordered their vehicle in prior months.

General Motors also announced further production cuts in September, including at two assembly plants, one in Indiana, the other in Mexico, that make some of its pickup popular trucks. It’s also cutting production at six other assembly plants.

Toyota, which had at first weathered the chip shortage better and the other giants and had credited the lessons learned during the Fukushima fiasco, said in August that it would cut global production by 40% in September.

The Fukushima fiasco in 2011 had made a mess of Toyota’s supply chains. It subsequently fine-tuned its lean-inventory strategy to make it resilient to such supply shocks. Part of it was that it demanded from its suppliers that they stockpile two to six months of semiconductors of all kinds for Toyota to deal with supply shocks, which obligated chip suppliers to prioritize Toyota’s orders. But it now appears that the cushion has largely been absorbed.

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  134 comments for “New Vehicle Sales Plunged Further in August amid Inventory Shortages & Production Cuts: Chip Shortage Wreaks Havoc

  1. MiTurn says:

    $41,000?!!

    Blows my mind…but not my wallet because I would never spend that amount to on a vehicle.

    • Joe Saba says:

      I’m looking like genius buying 2nd truck in january
      paid $45k for 2016 F350 platinum diesel
      of course diesel with 110k miles
      thinking of selling for $15k profit – probably wait til end of year and get $20-25k more
      still driving my work truck f250 diesel 2001

      • Depth Charge says:

        You said it was $50,000 on many different occasions, Joe. Sounds like you’re pulling numbers out of your asz to spin a narrative.

        • Joe Saba says:

          what I paid not WHAT IT IS NOW WORTH
          talk about pulling numbers out of asz

          it takes reading comprehension
          which I know mils lack severely

      • T S says:

        2001v isn’t as EPA choked and insanely cheaper get repaired

    • Jay says:

      And that’s average. Fancier trucks & SUVs are going for 50, 60, 70K.

      • COWG says:

        Jay,

        Try 80k and above….

        Me, I went the other way…

        Car max offered 35k for my 19 Ram that I paid 32.5 for two years ago…

        Put me 11k to the upside…

        Didn’t need it for the reasons I bought it any longer and I had another vehicle…

        If I need more capabilities, I’ll rent it…

        So I ,probably like many others, took this opportunity to reset my transportation needs and costs… damn the good luck !

        I’m thinking the Cuban model of automobiles makes more sense for me now…

      • Joe Saba says:

        yes my truck now bb out at over $60
        kind of ‘fancy’ truck
        oh, you mean little f150 ROBO trucks – hahahahahaha not worth $30k

    • JohnnySacks says:

      And zero incentive to produce or market base models. Why would any company not supply only loaded vehicles given buyers will grab whatever they can?

      • fajensen says:

        Well, that brilliant idea of only servicing “the high end of the market” did not work out very well for Bang & Olufsen, IBM, et. cetera and it will not work out well for Ford & Co either!

        What happens is that people looking to enter at the lower price bracket will find someone that meets that need and then they will stick with that brand instead or they “go generic” and shop around.

        Once the “brand name magic”, the idea that one “becomes someone” or “acquire quality products” by owning high-end stuff of this brand, is broken, it doesn’t come back ever again.

        The people initially lost to the pricing model will be justifying their investment in the “off colour brands” as “being smart with their money”, “not into this status thing”, “this product has better features for the price” and so on and so forth. Reprogramming.

        The only way for a brand to come back out of the hole is to reengineer their brand for entirely new demographies of customers, like Bang & Olufsen did with their digital product lines, with some succes, still they were limited by their corporate self image.

        Ford is dead already. Just give it a few years and it will figure it out.

        • Sams says:

          There is a difference, between chosing the loaded vehicle because that is what is available and chosing a expensive vehicle because of brand name. If all manufacturers play the expensive loaded vehicle card, customers have no choise.

        • fajensen says:

          Well, “if they are all at it” Someone will be even more incentivised to come right in at the base-level price point and eat all of their lunches – unless … maybe that’s why “we” have a trade war with China!?

        • Sams says:

          Welcome to the dark side of capitalism, maximum profit by any means.

        • Old Sailor says:

          I was always a Ford man. I walked away from Ford Super Duty trucks and went to Ram when Ford switched to the 6.0 diesel. I’ve stayed with Ram because of the price of Fords and GM/Chevys. Plus, you can’t beat the Cummins motor. My last “American” car was a PT Cruiser. Everything since has been Hyundai, with the exception of one Subaru thrown in the mix. I don’t see any changes for the future.

      • T S says:

        think ‘write-offs’.. then stick them in the lease market

    • Just ordered a new truck for half that amount, you people just aren’t shopping in the right place.

    • RH says:

      I have good news for you and I have bad news. As Jimmy Carter once was parodied as saying, I always wanted to own a $2,000 suit. Thanks to inflation, we will, sooner rather than later.

      Search for the opinions of Michael Gentile. Persons who are only pretending expertise, like a certain woman “analyst” apparently have no idea about the federal budget interest limitation on the banksters’ “Federal” Reserve cartel’s ability to create more US dollars to funnel more funds to and again bail out the banksters, even more than the TRILLIONS AND TRILLIONS that they funneled to them. Search your internet for information, which is usually censored in most media, as to their trillions in secret bailouts to their banksters and their cronies!

      Thus, our market is massively overvalued, contrary to her claims. Moreover, the banksters’ “Federal” Reserve will not be able to tame inflation by raising interest rates, because such raises would make the federal government unable to pay its bills for publicly-mandated necessities like Medicare, Social Security, the US Army, etc. (absent a massive increase in the revenues of the federal government via increases in taxes, which increase is probably not politically possible, because trillionaires and billionaires own our politicians.)

      Thus, I do not see how the inflation that is surging can be controlled. In short, prepare to pay not $40,000 but $100,000 or more in future years for a tiny vehicle, if you are lucky. As Michael Burry predicted, hyperinflation is coming.

      • RH says:

        One more thing, the banksters’ cartel, their “Federal” Reserve, is not just trapped as Mr. Gentile pointed out. Banksters’ fear of reforms that might remove their privileged positions, like French aristocrats before the revolution able to avoid taxes and laws, will cause it to be reluctant to slow down this speeding train as a taper tantrum follows its next efforts to slow its bankster bailouts.

        Already, the “misery” index among Americans is probably as high as in the 1970s. Read shadowstats’ alternate inflation charts and other, less manipulated inflation estimates. Thus, until the control of their “Federal” Reserve is wrested from the banksters’ greedy, grasping hands, the US economy will keep speeding along like a run away train with its breaks out down a mountain until its crash.

  2. Geoff says:

    How much is bitcoin mining chip demand impacting this?

    https://decrypt.co/62542/bitcoin-mining-piles-pressure-on-struggling-chip-industry

    It’s really hard to think up a more utterly useless and wasteful industry:

    — Environment damage (wasn’t oil bad enough for climate change?)
    — Facilitating criminality
    — Exponential greed and major bagholder potential
    — Solving problems that don’t really exist
    — Reinventing banking industry at 10x the cost (wasnt finance bad enough already?)
    — AND exacerbating the problems brought on by the pandemic

    • DF says:

      Not that much. The parts that are in really short supply are ones made on “legacy” nodes, i.e., manufacturing processes that are 15+yo.

  3. Remy says:

    I had a reservation in for a Ford Maverick base model – 20k. The date kept getting bumped out, and no dealers even had one to test drive.

    I decided to throw a couple grand and keep the old vehicle going for another couple of years.

    I fear the new sales model, for already overpriced new vehicles, is going to be the Tesla way – order at MSRP.

  4. MonkeyBusiness says:

    I don’t believe this. Powell tells me his money printing machine can fix anything. Plant shutdowns in Japan due to fire? Print more money. Plant shutdowns? Print even more money. No Ford? Buy a Tesla!!!

    • MCH says:

      Let’s face it, at this point, it’s all about the Fed regional presidents and their immediate underlings finding ways of enriching themselves. The latest gossip from that conspiracy rag the Wallstreet Journal is that Kaplan was somewhat active on the market last year. Although they didn’t specifically single out any of the others, the implication were that all the rest were busy buying and selling, wonder whose shoes Kaplan pissed in to get this special mention.

      I’m sure it was all a predefined trading plan with no active inputs, but when they actively author the future, why is it that they get to even play in the stock market?

      I do wonder how many shares of Tesla Kaplan owns though. But looks like he dumped some bond funds, I wonder why….

      • Shiloh1 says:

        It wasn’t gossip, WSJ article had link to the disclosures.

      • RightNYer says:

        These people are unrepentant crooks.

      • MonkeyBusiness says:

        Don’t forget California’s own Madam Speaker!!!

      • fajensen says:

        ‘Round ‘Ere we call it Gross Professional Incompetence when a banker gets nailed over insider trading.

        Everyone Effing Knows that even though one cannot get the infamous Belgian Numbered Account any more (thank to our dear supply-side allies in the War On Terror) one can still set up an LLP, where the controlling interests are recorded on physical paper sitting behind a rack of drawers in some lawyers office in Guernsey!

        Come On! Must it be clowns and amateurs all the way up!?

  5. makruger says:

    For families where both parents are working, this probably amounts to about $30K a year or more in transportation costs and that’s $30K less going into their retirement accounts or paying for their children’s education.

    Yet America still has no appetite for public transportation and the politicians only work to divide the populace with irrelevant issues. I don’t see a rosy future for America. Meanwhile people say investing in the emerging markets and China are risky. Not as risky as investing in the future of the USA.

    • MCH says:

      Well, good old George Soros himself was lecturing Blackrock, or Blackstone, or one of the Black ignis related companies about why it’s a bad idea to invest in China. He isn’t wrong technically there are still parts of the US that would make excellent investment opportunities.

      Although I’d still invest in the US any day, even with the whacko situation we have around the economy. That said, how are you getting to $30K per year for transportation? I mean if we use gas, let’s say you take an ordinary 30mpg HWY car, and fill it up once a week for about $50 to $60 give or take (using CA gas prices). You’re only at about $3K for fuel, double it for two cars, then let’s toss $5K on maintenance and stuff (kind of expensive, but just throwing some numbers out). You’re only at $11K. Are you assuming that you’re putting in car payments as well? I guess in that case, it can get expensive, but still not at $30K, right?

      • Engin-ear says:

        Interesting point.

        The total cost of ownership for a car would include :
        – fuel
        – road tolls
        – credit payments, including financial fees
        – parking place
        – car insurance
        – and some maintenance like new oil/tire/cleaning.

        For some extreme cases that could reach 10k+ easily.

      • Tom Jones says:

        I own a 2003 Dodge Durango with only 37k mikes. Insurance, tow insurance, yearly car tags, smog checks, new tires, oil change, etc, my calculations come to approximately $12 per mile to dive my car each year. Not counting gas (4.7 liter engine). Normally I only drive to buy food, banking, or medical. Walking many, many more miles for exercise per year, than I drive my car. The car is a luxury, covered; then tarps coving the cover. Perfect body and interior, yet I find the resale value is nothing.

        • Saxons Wrath says:

          When it all starts going sideways, you can live in it or rent it out. If you need it to leave the city on short notice, it will be priceless.

    • Winston says:

      “Meanwhile people say investing in the emerging markets and China are risky. Not as risky as investing in the future of the USA.”

      Not even CLOSE to being correct. Listen to the reasons from Kyle Bass that when you invest in China you actually OWN nothing there. Also, watch the 2018 documentary film “The China Hustle.” Nothing has changed since then.

  6. Ron says:

    These companies will price themselves out of market think 5,000 $ Chinese car to dumb to figure out most people only need a car for metro area 150 miles a day

    • 91B20 1stCav (AUS) says:

      Ron-re: ‘$5k Chinese car’, it sounds like Yugo’s (and Hyundai’s initial) real problem was mistiming the market…

      may we all find a better day.

    • Anthony A. says:

      $5,000 Chinese car won’t pass safety stands here in the USA. Someday there may be a really small and inexpensive EV made here that will pass safety, but given the F 350 kind of freight that is rolling around our freeways, I wouldn’t want to have a head on with one of them in my 2.000 pound EV that is mostly plastic and battery.

      Some day, maybe…

  7. MCH says:

    Isn’t it odd that the global supply chain was running so well through 2019, and suddenly, a little pandemic hits, and everything goes out the window. I wonder if someone actually dove into the details to see which chips were short where. After all, as mentioned previously, there are loads of chips to make a car work, take away one of them, and suddenly, you have a massive brick.

    It’s kind of like saying there is a special screw in every car that is manufactured by just one company in the world (for whatever reason) and suddenly, capacity got limited. I realize it’s a very inexact analogy, but I would be curious to see in the deep dive where the shortfall came from. Obviously, it’s not every chip. I wonder which companies could be responsible for a bulk of the shortages, or is it truly a problem for everyone. Too bad all of this is confidential information, and none of it will ever see the light of day.

    If nothing, it would be a fascinating study to understand the resiliency of the supply chain and would make a perfect case to remove sole sources.

    • Old School says:

      I just bought the base model Kymco 50cc scooter for running my short errands because I realized with Covid about 95% of my trips were within 3 miles of home and on 25 or 35 mph streets. Plus its a good way to beat summer heat when bored.

      Very low tech as in no fuel injection and it’s air cooled. Electric start but has back up kick start so battery will not let you down. 100 mpg. $2300 out the door. $18 per year registration and under $100 annual insurance and you are good to go.

      • Bobber says:

        Nice. Frankly, I don’t understand why they don’t put tax incentives on scooters. It is a great way to reduce carbon footprint.

        Also, why don’t they build more dedicated bike paths? With E-bikes and three-wheeled options, just about anybody should be able to transport themselves locally on a bike. It would be great for healthcare and the environment.

        • Sherm says:

          Have you met Americans? We aren’t exactly a population that prioritizes our health. We’ll take the shortcut that allows us to get to our destination quickly and comfortably every time.

          Also it’s probably not super practical to bike to work in a Chicago winter, so what are essential employees to do during the winter months?

        • 91B20 1stCav (AUS) says:

          Bobber-be sure to check the costs of building/maintaining ‘dedicated bike paths’, especially when major usage might demand they expand as large as a standard road-have already voted down one path-financing scheme backed by bicycle-tourist interests in our fair county that would have placed those burdens solely on sales taxes generated from the few and scattered small businesses in our rural area (have met great resistance to generating revenue from their own numbers for path construction/maintenance from the bicyclists i speak with on this subject…).

          may we all find a better day.

        • Old School says:

          The 50cc model scooters have a good design for carrying groceries. One bag under the seat. I use a soft cooler on the floorboard. They have a rack behind the seat that you can bungie a plastic milk crate type box.

          About 30 – 35 mph. Mine is only 205 lbs which means I can store it on my sunporch easily. I can pick up either end and just move it laterally out of the way.

        • KGC says:

          I don’t see incentives for scooters (many now coming as electric) or E-Bikes. What I see is the taxing and licensing changing to include them as “motor vehicles”, and the mandatory wearing of PPE (helmets, etc).

          This is going to be a huge revenue generator for cities. It will happen.

        • El Katz says:

          Scooters are heavy polluters. Much worse than a modern catalytic / fuel injected engine in an automobile.

        • Old School says:

          Earl,
          US standards are lax on scooters I think as 2 cycle are still allowed, but most sold are 4 cycle. New Euro standard is tougher and I think many brands will make that the world standard to make distribution easier

          I think for a two mile trip catalytic converters don’t get hot enough to do much in a car

    • wisoot says:

      Gone are the days when SCM is an academic problem. Politics drive. South Korea release a laptop a year or two before it sells in London for eg. In this day and age the art of not sharing is perceived to be getting ahead so that when leaders sit at the table they have leverage for other wider social issues. The shortage I am concerned with is of the wisdom longterm planning variety and country leader quality and ability to negotiate. Or not.

    • fajensen says:

      It’s kind of like saying there is a special screw in every car that is manufactured by just one company in the world

      That is *exactly* how it is “out in the real world”. Lots and lots of trivial, boring, bulk products are made by exactly One Factory, who are so very good at it that nobody will get into their market.

      In volume production, there *are* no generic components! One cannot just change one screw to another and expect that the robots will pick it up, insert it correctly and not strip the thread because the alloy is slightly different. The crimp pins that go into connectors are extreme precision automated products, if they are not *exactly* what the tools are set up for Chaos and Recalls will be in our not distant future!

      Chemicals like glues and sealants are even worse, the “dead harddisk debacle” back in, …., 2005 … ish? was because The Factory making The Epoxy for sealing the chips burned and they found a substitute, which leaked water vapour so the chips broke down after 2 years.

      I keep saying that the “Chip Story”, and “Corona Shortages” while true in that they also exist, are a diversion from the much bigger story:

      That someone with no understanding of their real position, went and kicked off a trade war with China, who happens to make the bulk of all those very unique bits, bobs and globs that must *all* be *exactly* right and *exactly* on schedule for mass production to function.

      China can diddle with supply lines and product quality for much longer than western manufacturers have hair left to pull out! It is totally deniable, costs them almost nothing, each item is a trivial fraction of the cost of the end product “here”, yet, without it, the production line stops and 99% assembled stuff piles up.

      The truth is that we like iPhones a lot more than Uighurs and at some point we will admit it and move on.

      • Sams says:

        Very much the trouth, but it extend beyond one specialized factory in China. Other product, the one factory is in a different country.

        The touble start the moment the fine tuned just in time flow of raw materials and parts get a hickup. Storm, a fire, a stuck container ship and the fault propagate as falling domino pieces.

        Even just a wrong estimate of the amount needed six monts in the future can trigger the disruption.

      • 91B20 1stCav (AUS) says:

        faj-brilliant ‘nuts and bolts’ presentation. (A good thing that those in charge of dispatching a nation’s military on necessary missions aren’t saddled with those concerns-oh, wait…).

        may we all find a better day.

      • MCH says:

        Wait… wait… are you saying that China… or more specifically the government is leveraging its ability as the world’s manufacturer and coupling it with the unknown virus of unknown origin to try to make more money and simultaneously punish their enemies by inducing supply chain failures and thereby screwing up other people’s economy?!?!?

        No…. That can’t be right…. Comrade Xi would never do such a thing. That’s just an outright conspiracy theory made to slander China.

        This must be prelude to another America first thing right? Remember, we, all of us live in a global community, there are international norms that goes beyond the need of one country to put itself above others (ahem… looking at you, America)

      • Auldyin says:

        @f
        Yup!
        Banning Huawei was the dumbest move our political clowns ever made and now they’ve sent a Nato battle fleet to China.
        It’s kamikazi diplomacy of the dumbest kind and we get no say in it.

    • FluffyGato says:

      “Just in Time” inventory had much to do with this as well.

    • Harrold says:

      Toyota did a deep dive after Fukishima interrupted their supply chain. They paid suppliers to stock pile 6 months of electronics.

    • gponym says:

      MCH – re: supply chain robust pre-pandemic: I’m far from being an economist, but I wonder how much of supply chain “theory” is predicated on ruthless “free” market competition. If such competition is more fiction than fact, what might that do to SC “theory” and its robustness component?

      Still, like you I’d love to hear just which chips are short – and would be unsurprised that such data might not be publicized in timely manner. It’s a small thing, perhaps defensible and not actually an instance of what I think is a much more insidious issue. Information has become one of the most prized global commodities, and a very tangible factor in all kinds of economic activity. And quite subject to hoarding and manipulation. Yet I hear few cries about the effects on my life, and life savings, of information hiding.

      (Not explaining it well, but info-monopoly seems to be one of the systemic “diseases” in our economy, largely invisible and nearly impregnable.)

  8. Jay says:

    I read from a reputable source that American’s have a about $10T in 1st mortgage debt. 2nd mortgages have cratered due to low interest rates. So 44% or $4.4T of that 1st mortgage debt was created in the last 12 months. That’s a ton a refi monies.

    Hello Ford & GM, this money is going to run out soon, maybe it already has based Wolf’s data. And, once interest rates start to rise in the next 12-18 months, there will be no refi’s. Prices of home will start to go down. Even a 5-10% decline over the next two years would put some people close to break even or underwater.

    The point is that the golden age of people buying new cars may be drawing to close. A lot of people can only afford a $41,000 because they had equity in their homes. Now that’s gone.

    Good luck with that, Ford & GM.

    • Stan Sexton says:

      Home prices in the Southwest will crater when there is no more water and power. Just look at recent pictures of Lake Powell, Lake Mead and Oroville Dam. California wants no more gas stations, power plants, reservoirs or refineries. Meanwhile, millions of apartments are being built. Growers in Arizona are already being shut down for lack of water. This will happen in Calif and the food supply will be affected. When your water bill is higher than your house payment, the value of real estate will be affected. All the authorities can do is a rain dance.

  9. Mendocino Coast says:

    All these Charts ( and they are great I feel ) seem to show that they have the same effect as the Fed printing more and more Money so far.
    Inflation just keeps going , the Job issue , No interest for savers ,
    Ect. no point in going on and on the List is so long . Seems that the point is that all of this has the same effect so far .
    All prices rise / Homes rise / Inflation keeps going And the creator continues to benefit
    the entire Economy has no long term forecast so next I expect the elections shall be talking about how they will fix this big mess hummm
    It is amazing that the immigrants want to come here ? for what ? free money .

    • Old School says:

      Marc Faber is a PhD economist, extremely well read about history and has lived a long life. He says when you start down the money printing route it 100% of the time ends badly.

      • topcat says:

        This is clearly not true as debt (i.e. money that was printed just for the purpose) has been used to finance wars for ever and much of that historical debt is still on the books, no one cares. The FED and JPCB and ECB have been printing money now for the last 13 years, Japab 20 years, and it has not ended badly. PhD economistst are educated in highly detailed bullshit.

        • RightNYer says:

          Uhh, no. For most of American history, money was borrowed to finance wars, but it was actually borrowed from investors. It wasn’t printed into thin air.

          Also, how can you say that the fact that something has not collapsed over a relatively short 13 year period means it has not ended badly?

          In any event, I think massive asset inflation, along with inflation of the services, IS bad.

      • sc7 says:

        “Dr. Doom” Faber has a laughable track record of making predictions that have not materialized.

        • Old school says:

          At least you will have to agree with this. He says asset bubbles destroy society’s work ethic because it kills motivation to earn from a paycheck when the road to riches is owning rapidly inflating assets.

  10. The Bob who cried Wolf says:

    And everyone made fun of me for holding onto my vintage 70’s f350. Not a single chip in this thing if you don’t count the ones on the floor. And it has a granny gear.

    • MiTurn says:

      TBWCW, I am envious! I bet it’s a beauty.

      I’m regretting that I didn’t keep my 1990 Ford F-250 4×4 when it blew out a head gasket after 350k miles – I just didn’t want to take the time to fix it. Butt-ugly, but a real worker

    • How many gallons per mile?

      • Anthony A. says:

        In the big picture of lengthy vehicle ownership, the cost of fuel is not that significant, especially when depreciation expense is zero and insurance is only for liability coverage.

        • Harrold says:

          8 miles a gallon.

        • 91B20 1stCav (AUS) says:

          AA-‘lengthy vehicle ownership’ is well-observed, and might be applied to things other than vehicles, as well (informed search for actual build quality of an item in question is necessary, though).

          Reminds me of my ‘amortized SUV’ ’72 Buick wagon in VGC purchased for $400 in ’92, 350 Buick (not Chev) small block gave 16mpg with large carrying capacity and adequate towing ability. Sold it six years later for $700, its service to me outstanding and economical, but no longer needed…

          may we all find a better day.

      • Auldyin says:

        @AB
        In my youth that was a question that obsessed Europeans but Americans never asked. How times change!

    • John Clarke says:

      Bingo, Dude! Same reason I am still driving my VW.
      My 1971 VW.

  11. Yort says:

    It is not just “Product” shortages for autos. I called a dealer today to have the AC inspected on an SUV, and was told the next appointment available was ….”January”. I paused and said “Next year???”. Then they proceeded to tell me that I could drop it off and they might get to it in 4-6 weeks if someone cancels, but the first available appointment is January 2022.

    I asked if it was parts or labor shortage, they said some part shortage, but mostly labor shortage. The second dealership on the south side of the city had the same labor shortage. Note that just four months ago, I had $1700 of service done at the same dealership with absolutely no delays due to labor shortages.

    Makes me wonder if having house prices here double in two years here is driving out people’s ability to exist on a basic mechanic salary. Some strange things going on in Texas right now in the mega-cities…and who knows if it is isolated to the “Texas Gold Rush” or an indicator of future America.

    On a side note, what will happen to inventory when $154 billion of EV rebates are “printed” by uncle sam and given to folks to buy $100,000 hummer EVs and Tesla moon trucks? Good luck finding an EV on the lot when that $154 billion govt gravy train hits this Fall…

    Yet who could have predicted that increasing the money supply 25% in a single year would cause labor/product/service shortages and other predictable consequences….so weird, right…LOL

    • Paulo says:

      They are busy, everywhere. If you can get into a service center within a week you are lucky. What ticked me off at a local high end shop is how my importance waned, or at least that is how it seemed. I blew a brake line on the boat ramp, crimped it off and decided I did not want to lay on concrete for 1/2 a day replacing it, only to be told it would be 3 weeks for an appointment…..from the company who apparently did not do my requested preventative maintenance as the line was so rusty a blind man could touch feel the corrosion. I went away feeling if I had been a logging contractor with a fleet, no problemo.

      Anyway, took my business elsewhere along with three other customers and will not forget about it. They probably won’t care, anyway, but I’ll get the computer generated service reminders for the rest of my life.

      • 91B20 1stCav (AUS) says:

        Paulo-in my experience, sadly, businesses that treat customers the way you were treated eventually expire, and are divided between the consciously quick-buck artists (prior reputable managements can, and do, change) and the ones that simply write their failure off to ‘bad luck’…

        may we all find a better day.

      • Swamp Creature says:

        I took my Subaru Forester to get a simple oil change. Got a half dozen e-mails. All of them were administrative bull s$it. No work done to get the oil change done. Went back the next day and they hadn’t even started working on it. Told the service manager to get the car out of the lot and I took my business elsewhere. This is one of the biggest car dealers in the area. I asked them why they didn’t work on my car. They told me they had 60 people ahead of me.

  12. Seneca’s Cliff says:

    Last weekend I was at the Toyota Dealer getting service done. This is one of the largest in the PDX metro area. When I came back to pick up the truck the lot guy said to give him a second as it was buried behind several other vehicles in the outbound service que. I waved my arm to indicate the huge 3/4 empty sales lot and said, “ I t should be easier now that you have so much extra room.” The guy came up close and whispered, “ A lot of the ones you see are cars the boss had us bring over from the rental operation down the street to make the lot look better.

  13. Harry Houndstooth says:

    The wisdom Wolf has repeated is that most of these recent high-priced vehicle purchases are discretionary; with his experience in new vehicle sales, he notes most people can just hang onto their cars for a while longer. What is going to happen when congress passes another $3.5T handout?

  14. Cas127 says:

    I don’t think I saw the YTD *revenue* figures of the manufacturers anywhere. It is one thing to slash supply and have sales prices soar…but was wondering if it is enough to offset big volume declines.

    Ditto profits (whose margins have likely soared)…the margins may be thriving…but are the revenue *levels* enough to deal with the makers’ huge fixed costs?

    • Wolf Richter says:

      Q1 was very strong: high prices, lots of volume. But in Q2, the story changed. Ford, for example: total global revenues in Q2 dropped by 26% from Q1. These kinds of volume plunges (in the 30% to 40% range) are hard to overcome with price increases and a shift to higher end units.

    • El Katz says:

      Reported retail sales don’t generate a plugged nickel of revenue for the manufacturer. They generate revenue for the dealer.

      The manufacturer only makes money when they produce vehicles, draft on the dealer’s floor plan, and deliver it to the dealer. That’s the “wholesale” side that rings the manufacturers register.

      The “retail” sales numbers are mostly vanity numbers. Makes investors think things are rosy. Some manufacturers don’t report monthly retail sales and others only report them quarterly. The theory is (and not always accurate) that the “retail” sales drive wholesale demand. But, not always. If the channels are stuffed it only reduces dealer carrying costs.

      The average transaction price growth is being partially driven by the lack of manufacturer cash incentives. The “rebates” of thousands of dollars are traditionally deducted from the transaction price. The dearth of cash incentives is driving the transaction prices up. It’s just math.

  15. Seneca’s Cliff says:

    My youngest, son who doesn’t drive or own a car, is looking like the smartest guy in the room. He lives a few blocks from work, the store, and the light rail to the airport and the train station. Not paying for a car and all the auxiliary expenses has allowed him to save half his paycheck for the past 5 years.

    • Paulo says:

      I’m seeing lots and lots of electric bikes around here, fat tires and on the road. Theft is a problem in any city, though. There isn’t a lock invented that can escape a battery powered grinder with a cut off disc. My nephew had his bike stolen this way in SF. It took the thief seconds.

      • Old School says:

        For my gas scooter base insurance was $7 per month, but I opted for comprehensive that includes coverage if it’s stolen. The the total for insurance was about $18 per month. It’s worth it just to be free of the hassle of the lock especially running in for quick shopping trips.

  16. MF says:

    Welcome to the return of inventory. Maybe not everything, but certainly items from sole-source suppliers.

  17. ThePetabyte says:

    I wonder if we could be facing the possibility of this having a profound effect on the consumer mindset. Maybe people will start realizing that you don’t need to dump your car as fast you think you do. Lord knows I’ve kept my Infiniti G25 running for almost 13 years now.

    • doug says:

      That is my thought. That urge to get a new car/truck has a half life. Are the vehicle mfgs still running lots of ‘buy a vehicle now’ ads? Those might extend the half life of the urge, but some will just move on/fix up their current vehicle with working AC or new tires or….

  18. David Hall says:

    The desire for fully autonomous vehicles requires more chips.

    Driving a motorcycle is not much fun in the winter.

    • Wolf Richter says:

      These days, even motorcycles contain lots of chips.

      • David Hall says:

        EV cars may have ten times more chips than gasoline powered cars.

        The switch to smart vehicles is causing some worry.

      • Dan Romig says:

        And soon to hit the market will be an electric snowmobile from Polaris and Zero Motorcycles. Minnesota + Silicon Valley tech = electric sleds for winter!

        Also, Vision Marine out of Montreal now has a 180 hp electric outboard, called the E-Motion 180, that’s noiseless, odorless and smokeless. It ain’t cheap, but there will be a demand for it I would bet. The first sales began this May, and they should be delivered to buyers soon.

        • Mike G says:

          I’m sure the Navy Seals would be interested for special ops. As would the, er, pharmaceutical importers running panga boats to the California coast.

        • El Katz says:

          I wonder how robust the batteries are for an electric snowmobile to operate in zero degree temperatures.

          Sounds like a rich man’s toy…

  19. Nicholas says:

    I smell a very rotten fish in this whole “shortages” b.s. talking point. It looks like just a way to push up prices and I’m not buying into it. These petroleum auto companies are also the ones that have a very dire future since Tesla is leading the path forward. My guess is these companies are trying to buy time by floating this fake excuse. Saving money on over stocking, operating plants, materials, wages, etc. while the engineering dept. decides which way to go into the new electrified future.

    • Old School says:

      Having worked in medium and high production manufacturing I just think a lot of the systems had the waste squeezed out and we’re optimized for market conditions. They didn’t have much redundancy or excess capacity available.

      Then the start stop of the economy and a few natural disasters plus government paying people not to work made a mess.

    • RedRaider says:

      Just googled EV registrations by state. Don’t know how accurate data is but:

      CA 425k
      WA, FL, TX 55k each
      NY, NJ, IL 30k each
      All others <20k each

      With the population of CA at 40 million (?) that's not a lot of EVs even in CA. Less than 1% of vehicles on road in USA is EV. If you doubled that each year it would take 5 years to break the 50% mark. If the chip shortage lasts multiple years it will be even longer. And I don't think anybody is seriously suggesting growth rates like this. I plan on waiting and seeing if there's a bright future for EVs.

  20. historicus says:

    And mechanics on strike where I live….because of INFLATION

    Central bankers have set the world into a tail spin of sorts with this inflation……

  21. SpencerG says:

    I think it was Easter when my aunt told me that the local Toyota dealership had called her to see if she was interested in selling them her Camry. It is not anywhere close to being a NEW Camry. Dealers are just that desperate for inventory.

    • DawnsEarlyLight says:

      A dealer offered me a great trade-in price for my F150, but there were no vehicles available to buy! Later sold it for a $10k gain from what I paid in 2016!

  22. LM says:

    We are in month 18 of a global pandemic and witnessing the ongoing lack of resilience and greed of huge segments of the population. Automakers, home sellers, those milking the unemployment benefit, and others who want to capitalize personally on this moment are morally reprehensible—America will continue to suffer unnecessarily because of this lack of responsibility to the greater good, to the WHOLE of society. I personally am so disturbed spiritually, along with annoyed by inflation and all else resulting from idiotic human behavior. Society has become a middle school project with 7/8 of the team unwilling to do the work.

    • fajensen says:

      I am sorry, but, “the greater good” has long been corrupted to mean “the good of the great few” and, frankly, I and most people, would cross the road to pee on them if they were on fire – in order to steal their wallet.

    • Sams says:

      People are starting to act as rational capitalist on all levels. Maximize their own profit by any means. That may make capitalism break down. At least society will be abondoned as an idea to work for.

    • Sierra7 says:

      LM:
      America has always been about money. It is now, and has been all it’s short history. “Kill them all and let God sort them out!”
      Whether war on the battlefield or the war with the commons by the elites.
      That’s America!

  23. Brant Lee says:

    I hope I can wait out a newer car like I did lumber. Yay, lumber prices are down finally, in fact, cheap here, almost pre-pandemic. Glad I waited.

    Maybe it’s because lumber doesn’t need computer chips, because apparently, trees are available. Chips will catch up with demand when?

  24. CJH says:

    Is there a global labor shortage? I’ve read that we’re coming down from a multi decade surge in labor supply. This narrative claims the surges of labor supply in China and other Asian nations; the former Soviet Union nations; not to mention the Boomer surge–is over. These labor resources are no longer expanding, but are declining. Will wages increase? Is that inflationary? It’s hard not to notice but our financial system naturally funnels money up to the owners of capital. Progressive tax rates would help, I suspect.

  25. HollywoodDog says:

    As someone who’s watched Mad Max: Fury Road numerous times, I’m eager to see where this all leads.

    • Saxons Wrath says:

      Just be really really really careful what you wish for….

      You may just get it, and not the way you are thinking.

  26. David W Young says:

    Dusting off my Crystal Ball, I see a perfect storm over the not-so-distant horizon for the global auto industry. I expect demand for new vehicles to soften further with Covid mutants coming out of the woodwork, sky high prices like an ATP of $41k causing hopeful buyers to faint before they even get into the showroom, and based on a series of Additions to Payroll Releases in 2021 that are nothing but weak. Overall, I see a global economy that is turning down, not up, as the cheerleaders on Wall & Broad would have you believe. Same goes for the Pablum coming out of Powell’s mouth and the Biden Administration.

    Since I bought my first car in November of 1972 at a livable price of $4200, there is no way in Hades that I will ever pay anything close to $41,000 for a machine on four round pieces of rubber. And with the used vehicle market totally out of control on prices as well, I am boycotting that lesser-of-two-evils alternative for many quarters to come. Here in Frederick County, Virginia, I am preparing to provide smelling salts to my neighbors when they get their Personal Property Tax bills on their literal stables of relatively new rides in early 2022. The County is going to be gigging behind us citizens’ backs since the values of NADA used car prices for January, 2022 could be some 20% to 30% higher than 2021 January NADA levels.

    Let’s see: My ride is another year older, the rate may have gone up for the Tax since the 10% Entertainment Tax here in Virginnie fell like a rock starting in 2020 with restaurants, hotels/motels, etc. being shut down due to Mutant One, and us peons are getting hit with higher Real Estate Property Taxes already from the 2020 new appraisals. Insult to injury. This should be a fun thing to observe. My rides are 19 and 12 years old, but that possible 25% increase will boil my blood as well, at least for a few moments. This Personal Property Tax in Virginia is one major reason that I keep vehicles until the doors fall off.

    So amortization of the now typical 63 months to try to get out from under a Vehicle Loan Nut divided into a trade-in adjusted Transaction Price of $41,000 less say $8,000 with people keeping vehicles for some 11 years now equals (drum roll or egg roll, please) $524 before tax and fees on the purchase. So if the average American after-tax income per year is around $53,000 or monthly at $4400, then the out-of-the-blocks auto loan is consuming 12% of income cashflow. Crude, but you get the picture. We have not even included gasoline, maintenance, insurance, and taxes which could easily come to 3% to 5% additional absorption of monthly income flow.

    The new vehicle manufacturers are in for one heck of a 2022 and beyond, Once the chip shortage rights itself, partially because other durable goods users are also going to face declining demand due to Covid mutants, economic air pockets, and price resistance which will eventually show up in all durable goods, the producers are going to be faced with declining demand in the new and used vehicles markets for now very expensive rides. New will get hit the most due to affordability issues with a soft economy, then used will feel the heat.

    There sure as heck isn’t any V shaped recovery appearing in the U.S. economy in September, 2021. Not even a lazy L. Too many uncertainties in a pricing environment that has become increasingly unaffordable for most Americans with income streams still caught with minor annual increases. Raises are finally starting to reflect the Inflation Reality, but that takes a lot of time to reach all levels of the Food Chain. And Taxes at all levels are destined to go up, up, and away with so many governmental bodies at the brink (or over the edge!) of Solvency.

    • Anthony A. says:

      David, the new auto buying/price thing and subsequent tax costs will all be brought back in line with “no down payment” 84 month financing @ 3%. Easy Peasy!

    • Ron says:

      Amen

  27. DR DOOM says:

    Looks like the American Dream may be a wet one. That median price home the F-150 and the wifes SUV plus that 4 cycle Merc on the 16′ fish/ski boat is going to be well north of 500k. What the hell honey. We can sit on lawn chairs under a 4×8 sheet of plywood to eat on. Your brother in law can bring us some more cinder blocks to put the box springs on. Bean bags are really cool. My Duck Dynasty Wall Mart set is a classic and will be great for the living room. Let the kids free range in the neighborhood for clothes and extra food. Education? Who needs a f’ing education . Only skill they will need they’ll ready got. The lphone. Gotta keep track of when the free money rolls in from the Gov’t just like we do.

    • DawnsEarlyLight says:

      Sometimes I find it hard to tell when you are being sarcastic! 🤣

  28. random guy 62 says:

    Seems to me this whole mess is related to too much money being available. Too many people with too many dollars chasing too few real goods. Supply and demand is usually kept in balance by people simply not having the money (cash or credit) to buy whatever the heck they want.

    Governments everywhere just goosed both cash and credit availability by handing out cash, lowering interest rates… all while production is constrained because the virus is making business more difficult.

    My take is that these shortages will get back to normal a few months after we quit overstimulating consumption. I get the reasoning for the stimulus, but they WAYYY overshot this one.

    • Depth Charge says:

      That trollfaced shrimp Yellen cackling about “going big” with Weimar Boy Powell adding nitrous to the printing press was the worst mismanagement of a country in history.

  29. Auldyin says:

    I saw a pitch for a start-up today which could be another doosey for the car industry.
    AirB&B for cars. Story goes, the average car spends 96% of it’s life parked somewhere. This app allows you to put your car up for rental eg. when you are at work. The Co does insurance etc. and has a smart key coding ap system that allows the renter to start the car and drive off. Payment is done via app and good renter scores can earn discounts. The car gets a module that monitors driving style to earn points for the renter. Cars must be less than 100k mls and other services are available as add ons.
    Like AirB&B it can be a nice little earner on what would be dead metal. Sounds like a great idea to me, but not great for cars if that 4% of use equals 20 people using one car.

    • Wolf Richter says:

      Auldyin,

      Here in the US, car-sharing, as this is called, has been around for a while. One company that does this, Turo, has been around for a decade. There are others. I have never used them and don’t know what they’re like.

      • Depth Charge says:

        I won’t even let immediately family drive my vehicles. Strangers? That’s a HELL NO.

        • Auldyin says:

          @DC
          I’m like that but you get to select driver pedigree on the app before you agree to the rental. The higher the driver pedigree, the lower the rental he is expected to pay. They say the system incentivises good behaviour but I’ve seen some of these AirB&B party aftermaths.

      • Auldyin says:

        @W
        Traditional car share was a question to these guys.
        They say their USP is the uniqueness of their hard and software which gets fitted to the car.
        If Turo has been around that long, could they possibly be ripe for tech disruption if they haven’t kept up.
        I have no idea but it’s one to watch IMO. I’ve just gone short cars, so it gives me another option versus buses or taxis. Depends on price of course as always.
        Cheers

    • pj says:

      The rent-an-idle-car model is also great for speeding up the wear and tear and eventual death of existing gas engine cars for faster replacement (or no replacement) by EVs. Make no mistake about it, agenda 2030 calls for us all to eventually be riding around in autonomous electric cars with very limited range. Prisoners in tightly controlled open air prisons called mega-cities.

  30. Erick S Fleischmann says:

    I own a 2000 Ford Ranger
    1993 Ford Explorer 4×4
    1999 Dodge Dakota
    1993 Dodge Dakota 4×4
    2000 Chevy 3500 4×4
    1982 Chevy Pickup 4×4
    All work for my business and I usually have 1 being repaired or needing maintenance at any given time. All are owned debt free. Insurance is cheap and so are parts.

  31. Swamp Creature says:

    I’m keeping my 2000 Corolla until it is totaled in an accident. Has only 85K miles on it. Will register it as a historical vehicle with the DMV. No chips in it.

  32. drifterprof says:

    Back in the 60s my father bought a Toyota Crown (4 speed manual, 6 cylinder). The Crown wasn’t available in the U.S., but someone had imported it personally. That was a fun car to do my first driving on, and lasted about 250k miles. The neighbors all made fun of us for buying a weak non-American quality Japanese car. Things changed a lot over the decades.

  33. T S says:

    Hum, ‘I need those 7nm chips for next year’s production trucks’ (2019).. [chip production failure rate of +45%] .. ’cause they say ‘this is the move’ at the lodge…

  34. pj says:

    I think the “chip shortage” is just a cover story to slowly dismantle the car dealership sales model and dwindle the supply of gas engine cars ahead of the roll-out of more EVs, expanded public transport and less car ownership overall. That’s all part of agenda 2030 plan. Besides, if I wanted to limit gas engine cars over the next 10 years I’d want a car delivery model like Carvana, where I know I can deliver a car that is set to self destruct in 10 years, instead of leaving it up to random dealership lot selection by customers.

    I’ve come to believe that nothing the talking heads claim something is about is actually what it’s about. Lies 24/7/365

    • Auldyin says:

      @pj
      EV’s will have all the system chips of IC cars plus loads of extra chips in more computer control of electrical drive and dynamic braking systems which are very sophisticated to eke out every watt of battery life and performance. Not to mention checking if you’re speeding or drunk and tracking your journeys for Google and the NSA or even the FBI if you’ve been anywhere nefarious. The only way to avoid chips is to build your own car which I seriously wish I was young enough to do.

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