In recent weeks, automakers have sharply scaled back their production schedules as they struggle to bypass the shortage of computer chips, which control dozens of functions in all modern vehicles. In a report on Wednesday, Goldman Sachs said it expects new car inventories to fall further in August, to around 1 million, before starting to rebuild steadily in September. Stocks will remain well below their pre-pandemic levels until 2022.
Earlier this month, General Motors announced it would stop manufacturing most of its full-size pickup trucks for a week due to semiconductor supply constraints.
Other automakers have experienced similar setbacks. Both Honda ( and )Toyota ( stop production at factories in Asia due to chip shortages. Ford announced in June 2021 that it was slowing production at eight factories, including six in the United States, until early August. )
Tight supply and surging demand have pushed car prices, new and used, up through the roof.
The Goldman Sachs report says new car prices are likely to continue to rise over the next several months, peaking at around 6% above their pre-pandemic level towards the end of the year. However, prices are expected to retrace about 30% of their increase from the pandemic era by the end of 2022.
The used car market is accelerating
A shortage of new cars has pushed consumers towards used cars in recent months, creating a scorching used car market.
Used car prices rose 10.5% in June 2021, the biggest month-on-month jump on record, and 45.2% in the past 12 months. The average price for a used car hit $ 26,500 in June, according to Edmunds.
The demand for used cars was so great that some people were selling used cars for more than they bought them, and cars over 100,000 miles were going up in value.
But there are signs that the used car rush is slowing down. Used car inventories appear to have bottomed out in April and prices likely peaked in June 2021, according to the Goldman Sachs report. Prices will likely track about 35% of their growth since the start of the pandemic by the end of this year and more than 70% by the end of 2022.
Other reports have shown similar trends in the used car market. Wholesale used car prices, the price dealers pay for the cars they sell to customers, fell in the first two weeks of July as inventories rose, according to Cox Automotive.
Another report from Cox Automotive showed that the retail price of used cars, the price customers pay, has increased, but at a slower pace over the past month.