By Robert Hughes
Sales of light vehicles totaled 13.3 million at an annual rate in March, down from a 14.0 million pace in February. The March result was a 4.6 percent fall from the prior month and was the tenth consecutive month below the 16 to 18 million range, averaging just 13.6 million (see first chart). Weak auto sales are largely a result of component shortages that have limited production, resulting in plunging inventory and surging prices.
Breaking down sales by origin of assembly, sales of domestic vehicles decreased to 10.4 million units versus 10.8 million in February, a drop of 4.0 percent while imports fell to 2.93 million versus 3.13 million in February, a decline of 6.5 percent. Domestic sales had generally been in the 13 million to 14 million range in the period before the pandemic, averaging 13.3 million for the six years through December 2019. The domestic share came in at 78.0 percent in March versus 77.6 in February. Domestic assemblies fell for the third consecutive month in February, coming in at 8.15 million at a seasonally adjusted annual rate. That is down 7.0 percent from 8.77 million in January and still well below the 11.2 million average pace for the six years through December 2019 (see first chart).
Component shortages, especially of computer chips, continue to restrain production for most manufacturers, creating a scarcity for many models, leading to lower inventory and higher prices. Ward's estimate of unit auto inventory came in at 107,400 in February, up from 106,200 in January but still near the all-time low (see second chart). Inventory may be stabilizing as the average over the last six months was 109,533 and has not dropped below 100,000. The Bureau of Economic Analysis estimates the inventory-to-sales ratio fell to 0.373 in February, a new record low (see second chart).
The plunging inventory levels have pushed prices sharply higher over the last two years. However, prices may be stabilizing with the average consumer expenditure for a car coming in at $32,552 in February, down 1.6 percent from January, the second consecutive monthly decline and the third in the past four months. The average consumer expenditure on a light truck fell to $48,095 from $48,665 in January, also the second decline in a row and third in the past four months (see third chart). Still, the February levels represent 12-month gains of 18.0 percent and 12.7 percent, respectively.
As a share of disposable personal income per capita, average consumer expenditures on a car came in at 59.0 percent versus 60.2 in January but up sharply from 41.6 percent in March 2021. The average consumer expenditure on a light truck as a share of disposable personal income per capita was 87.2 percent versus 88.5 percent in January but 64.5 percent in March 2021 (see third chart). Both measures are still below their all-time highs.
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