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An End to the Car Shortage?

February 3, 2022 By Young Research

By carroteater @ Shutterstock.com

For the last two years, Americans driving by car dealerships-traditionally bloated with inventory-have seen bare parking lots and empty showrooms. The shortage of silicon chips, an element crucial to modern-day vehicle production, has created a shortage of vehicles across the world. Now, there are signs the vehicle shortage may be abating. Stephen Wilmot reports for The Wall Street Journal:

Getting your hands on a new car should become easier this year. The big question for both consumers and investors is at what price.

The most surprising projection made by General Motors GM -0.74% when it reported fourth-quarter results after the bell on Tuesday was for growth of 25% to 30% this year in the number of vehicles it ships to dealers globally. In 2021, the semiconductor shortage held back GM’s deliveries in the second half, so the expected jump would mostly make up for lost ground. It is still aggressive relative to the current industry consensus.

Toyota, which outsold GM in the U.S. market for the first time last year, recently cut its production target for February due to persistent bottlenecks. Forecaster IHS only expects 8.5% growth in vehicle production globally this year as supply constraints drag into 2023. GM’s contrasting message was that its own car production should return to something like pre-pandemic norms in the second half.

Normalization is a double-edged sword for Detroit. GM reported record profits for 2021 because its limited output forced consumers to compete for vehicles at dealers, and also because it prioritized the production of higher-margin models such as pickup trucks and big sport-utility vehicles. The company expects this second effect to unwind this year as it restores production of smaller SUVs and sedans, implying a less profitable mix of sales. Yet it is still banking on high prices given the continuing strength of consumer demand and the dearth of new vehicles available today.

Read more here.

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