By Nora Naughton 

Auto makers are reporting a jump in U.S. vehicle sales in the opening months of 2021, boosted by continued consumer demand and some easier year-ago comparisons, but chip shortages and other supply-chain snags threaten to derail that momentum.

Overall, U.S. auto sales rose 11.3% for the three-month period, according to industry data firm Wards Intelligence. The industry's annualized selling pace in March could hit 16.8 million vehicles, according to Wards, a sign that the level of demand is about on par with what it was before the Covid-19 pandemic.

The increase is in part being driven by the collapse in business at the end of March 2020, when the economy began to shut down to limit the spread of the coronavirus.

Auto-industry sales in January and February were still off 3.3% and 13%, respectively, according to automotive-data firm Motor Intelligence. March sales, however, are expected to leap, with car companies posting double-digit gains for the month compared with a year earlier, industry forecasts show.

For the U.S. car business, it has been a choppy start to the year. A global shortage of semiconductors has disrupted production at many U.S. factories, hitting car-company earnings and leaving dealerships with lower inventory, particularly on popular trucks and sport-utility vehicles. Then, in February, winter storms in Texas further disrupted the production of plastics used in seat foam and other materials, adding to the industry's supply-chain woes.

Still, customers kept buying.

"Honestly, the numbers probably would have been even higher," said Judy Wheeler, Nissan Motor Co.'s U.S. sales chief. "Between the chip shortage and the weather -- it definitely did have an impact."

Nissan reported a nearly 11% increase in U.S. sales for the first quarter.

Among the U.S. car companies, General Motors Co. on Thursday posted a nearly 4% increase in its U.S. sales for the January through March period and said it expects auto demand to remain strong throughout the year.

Stellantis NV, formerly Fiat Chrysler Automobiles, reported a 5% increase in U.S. sales during the first quarter, and Ford Motor Co.'s U.S. sales were near flat for the period, according to company figures.

Toyota Motor Corp. and Honda Motor Co., which weren't hit by the chip shortage until later in the quarter, said U.S. sales in the first quarter increased 22% and 16%, respectively.

Meanwhile, South Korean auto maker Hyundai Motor Co. said it was able to keep U.S. dealer inventory steady during the first quarter, and reported a 28% increase in sales.

New-vehicle demand is expected to grow in the coming months as the car business hits the busy spring-selling season and the distribution of new stimulus checks puts more money in shoppers' pockets.

Tight inventory levels didn't have much of an impact on buyers in the first quarter, but that is likely to change in the coming months, Cox economist Charlie Chesbrough said.

Already, at the end of February, vehicle stock levels at dealerships and in transit were down 26% compared with a year earlier, according to research firm Wards Intelligence. That is near the lows reached last summer when auto makers were starting to recover from the pandemic-related factory closures in the spring.

Ford said Wednesday that it would halt production in April at several U.S. factories, including its two major truck plants.

Stellantis, the maker of Jeep, Ram and Chrysler, said it would halt production at five North American plants through mid-April, following other major car companies that have paused work at factories in the region because of parts shortages and backups at West Coast ports.

While demand continues to outstrip supply, car companies have pulled back on deep discounts offered early in the pandemic and consumers are spending more to drive off the lot in a new ride.

The average price paid for a new vehicle in the first quarter was $37,314, the highest ever recorded for the quarterly period, according to J.D. Power.

Some dealers worry the extended inventory shortages could disrupt some important new-model launches this year.

Joe Shaker, owner of Shaker Automotive Group, which has stores in Connecticut and Massachusetts, said he is most concerned about any delays of long-awaited vehicles such as the Ford Bronco and Jeep Wagoneer.

"We'll keep battling through and hopefully be better for it when we're on the other side," Mr. Shaker said of the inventory crunch.

Jeff Dyke, president of Sonic Automotive Inc., a publicly traded dealership chain based in North Carolina, is more optimistic. Mr. Dyke said that while sales during the summer months could be lean as dealers restock, he is encouraged by the strength in demand throughout the pandemic.

"As we roll into the third and fourth quarter, this too shall pass," he said.

Write to Nora Naughton at Nora.Naughton@wsj.com

 

(END) Dow Jones Newswires

April 01, 2021 19:51 ET (23:51 GMT)

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