U.S. auto sales drop in July, global chip shortage hits strong demand

U.
S.
sales of new light-duty vehicles fell in July from June, the third straight monthly decline, as the industry continues to grapple with supply chain issues and a global shortage of semiconductors
.

North American automakers have had to adjust production plans due to chip shortages
.
The shortage of chips comes as demand surges as the economy begins to reopen from Covid-19-related lockdowns
.

According to the Bureau of Economic Analysis (BEA) seasonally adjusted annual rate (SAAR), sales were down 3% from the previous month
.

Compared with the same period last year, sales fell 0.
3%
.

A more accurate comparison, however, is July 2019, before the Covid-19 pandemic arrived and the economy was unaffected by related factors
.

On a seasonally adjusted basis, sales were down more than 13% from July 2019, and unadjusted sales were down 7.
8%
.

NADA chief economist Patrick Manzi said tight inventory at dealerships has limited sales
.

Looking at the industry as a whole, Manzi said inventory levels at the end of July were likely to be less than 1.
3 million units, down from 1.
4 million at the end of June
.

“At the beginning of the year, tight inventory meant consumers would be forced to choose a different colour or trim,” Manzi said.
“
But with inventory slowly dropping to historically low levels, consumers in many markets will have to accept a completely different model, or pre-order The car they want
.
"

Major U.
S.
automakers expect a sharp increase in production in the second half of the year as global semiconductor shortages begin to ease
.

Executives at Ford Motor Co.
and General Motors said on recent second-quarter earnings calls that the industry could still face a delta variant of the coronavirus, even though production is expected to improve in the second half of the year due to improved supply of microchips.
adverse effects
.

But Manzi warned that automakers could make additional production adjustments, which could make August inventory levels similar to July
.

Despite growing concerns about the rising infection rate of the delta variant of the coronavirus, Manzi believes demand will remain strong for the rest of the year
.

"Despite chip shortages limiting production, demand for new vehicles from retail and fleet customers remains strong," Manzi said.
"Our total forecast for new light-duty vehicles in 2021 is 16.
5 million
.
"