Semiconductor Shortage Slams Auto Sales in June. Ford Swoons. Toyota, after Hoarding Chips, Blows Away GM for First Time Ever

Toyota, pioneer of just-in-time inventory, goes: Hahahahaha…

By Wolf Richter for WOLF STREET.

Ford Motor was the last major automaker to report US sales for June on Friday. Most others reported US sales on Thursday. GM and FCA don’t report monthly sales; they only report quarterly, so Q2 sales. Tesla doesn’t report US sales at all; it only reports quarterly global sales, and the industry guesses its US sales. The semiconductor shortage and supply-chain fiasco were written all over auto sales in June.

For the auto industry overall, sales plunged in June.

June sales for the industry overall fell to 1.30 million vehicles, down 14.2% from June 2019, after a strong March, April, and May (data by Bureau of Economic Analysis). In terms of the Seasonally Adjusted Annual Rate (SAAR) of sales, which takes the number of selling days and other seasonal factors into account and then annualizes the result, vehicle sales came out this way:

  • June: 15.4 million SAAR, -9.5% from June 2019; except for the collapse last spring, it was the lowest for any month since January 2014.
  • May: 17.0 million SAAR, -1.0% from May 2019.
  • April: 18.6 million SAAR, highest total for any month in 16 years, +7.4% from April 2019.
  • March: 17.9 million SAAR, +7.9% from March 2019.

But don’t cry for automakers. They’re making it up with price.

Automakers have shifted production to their highest profit-margin units; and they’ve cut incentives, and dealers are charging record prices, over sticker in many cases. As a result, the average transaction price and average per-unit gross profits have spiked to records in June, as consumers have adopted a new attitude that I have never seen on dealer lots before.

Rather than haggle till they get the price down, or go on buyers’ strike as they had done for a couple of years during the Great Recession, consumers are paying whatever it takes to get a new or used vehicle as their whole mindset about inflation has changed.

Ford sales hobbled by massive production cuts due to chip shortage.

Ford sounded pretty chipper in the headline of the news release, focusing on the few things it did sell more of: “Ford Electrified Vehicle Sales up 117 Percent in June – Delivering New First Half Record – Mustang Mach-E Sales up 27 Percent Over May…”

But Ford’s total sales in June plunged 26.9% year-over-year to 115,789 vehicles, with retail sales down 32.5%. These are deliveries by dealers to their customers, or by Ford to large fleet customers, such as rental car companies.

Ford has given up on cars. The only “car” it still manufactures is the Mustang. It killed all its other car lines. And that sales volume just went to Toyota, Honda, Nissan, Kia, etc. And total car sales, after having collapsed every year for years, collapsed by another 82% in June year-over-year, to just 2,868 Mustangs and a handful of leftover Fusions that were still sitting on dealer lots.

F-150 sales plunged 30% year-over-year in June to 45,673 trucks. In terms of SUVs, Escape sales plunged 40% to 8,871 units, Explorer sales plunged 38% to 9,445 units, and Expedition sales plunged 43% to 7,453 units. These are all popular models with plenty of demand.

The problem wasn’t lack of demand, but lack of supply. At the end of April, Ford announced that it would likely cut global production in Q2 by half. The entire first half was marred by production cuts at various plants. On June 30, Ford announced further production cuts for July and August. The culprit is the same every time: semiconductor shortages and parts shortages.

Toyota, paragon of just-in-time inventory, blew everyone away by having stockpiled chips.

Following the Fukushima disaster in 2011, which massively tangled up its just-in-time supply chain, Toyota demanded from its suppliers that they stockpile two to six months of semiconductors of all kinds for Toyota to deal with supply shocks, Reuters reported in March based on sources.

Because of this “business continuity plan” (BCP), when the semiconductor shortages hit, suppliers were obligated to prioritize Toyota’s orders. The sources told Reuters that the microcontroller units (MCUs) that often combine CPUs, flash memory, and other devices, and that control functions such as braking, acceleration, steering, ignition, combustion, tire pressure gauges, and rain sensors, were hit the hardest by the chip shortages.

A Toyota spokesman told Reuters that one of the goals of its lean-inventories strategy was to become sensitive to inefficiencies and risks in supply chains, identify the potentially most damaging bottlenecks, and to devise a system to avoid them.

“The BCP for us was a classic lean solution,” a spokesman told Reuters. But Toyota pays the suppliers for this service. Turns out, those costs were a good investment.

In June, Toyota blew everyone away. While inventories were super tight due to production cuts with other automakers, Toyota had the supply and could meet demand, and demand was huge because people wanting to buy Ford or GM products had trouble finding them, and Toyota dealers had product.

And in June, Toyota’s total sales skyrocketed by 40%, blowing away GM and Ford and everyone. The hated cars that Ford threw under the bus, so to speak? Well, Toyota sold 68,771 cars, up 57% year-over-year. Ford sold 2,868 cars in June. Ford’s idiotic decision to walk away from cars just handed this market to Toyota and others.

Toyota also sold 77,944 SUVs, up 19% year-over-year. And it sold 138,560 trucks, up 33% year-over-year.

GM was bypassed in Q2 by Toyota for the first time ever.

General Motors doesn’t report monthly sales. It only reports quarterly. It reported Q2 sales of 688,236 vehicles, up 40% year-over-year – including record sales for its EV, the Bolt. But it was surpassed for the first time ever by Toyota (688,813 units in Q2).

Q2 included May when there was still more inventory, and it included April which was the biggest month for the industry since 2005. By reporting only quarterly, GM obscured the results of June under the strength of April and May, and it still got bypassed by Toyota.

The automakers’ changed data game.

All automakers used to release monthly sales data on the same day, a ritual that had been finely honed for many decades. They got these figures from their dealers, added them up, and released them with sales details by brand and model.

Then came Tesla, which didn’t play ball. It didn’t release US sales figures at all, but only global sales figures, and only quarterly.

Eventually, GM stopped releasing monthly figures as well and switched to quarterly, then Ford stopped, then FCA stopped, then others stopped. Last year, Ford backtracked and started releasing monthly figures again, but usually a day after everyone else. Go figure.

Monthly industry sales totals – both unadjusted and SAAR of sales – are released by the Bureau of Economic Analysis, which relies on industry estimates. There are other industry estimates available behind paywall. Getting all the detailed monthly data from automakers directly by brand and model is no longer possible for all automakers, including the biggies GM and FCA, and that was apparently a good thing because their sales in June were dismal.

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