Ford’s August sales dropped sharply from a year earlier.
Courtesy Ford
U.S. car sales look like the country is in a recession, not a recovery, and the global automotive semiconductor shortage is the reason. Ford Motor is the poster child for the industry’s current issues.
Ford
‘s (ticker: F) August sales dropped 33% compared with a year earlier. Sales at retail locations—excluding fleet customers—dropped almost 40%. Ford actually hailed the results as a triumph in its news release: “Retail sales grew 6.5% from last month due to production and inventory improvements.”
The company has a point. Total vehicle sales came in at 124,176 in August, compared with 120,053 cars in July. But Ford sold 185,665 vehicles in August 2020.
Investors don’t seem all that worried about the year-over-year numbers. Ford stock has barely budged since August sales numbers for the industry started coming out.
One reason investors are brushing off weak sales is that pricing is sky high. Average industrywide transaction prices climbed about 17% in August from a year ago, according to Deutsche Bank analyst Emmanuel Rosner.
Others on Wall Street see better days ahead. Credit Suisse analyst Dan Levy blamed inventory for the August sales drop, but added in a Thursday report that “significant pent-up demand is building.”
The inventory situation at Ford is a little better than it was in July and better than the situation at
General Motors
(GM).
“A silver lining to August results was Ford’s inventory rebuild,” added Levy. Ford, and the rest of the industry, like to operate with about 50 days to 60 days of car inventory at dealerships. Industrywide inventory is at about 23 days now. Ford’s inventory situation, however, improved in August to about 210,000 units—or 45 days of supply at current selling rates, Levy writes. That should give the auto maker a little breathing space for September and the third quarter overall.
GM dealer inventories are at about 114,000 units, according to Levy. But rebuilding its vehicle stock will be difficult as the chip shortage lingers. GM is taking additional downtime at plants in the U.S., Mexico, and Canada due to the lack of semiconductors.
That chip situation isn’t exclusive to GM. All auto makers haven’t been able to produce as many cars as they would like. Estimates for lost global production in 2021 run to about 5 million vehicles, or roughly 5% to 7% of total vehicle demand.
Hopefully, for the industry, that demand isn’t lost, and has just shifted into 2022 and beyond.
Write to Al Root at allen.root@dowjones.com
