The U.S. auto sector on Thursday continued to show signs of a recovery from the COVID-19 pandemic as improving demand in the third quarter for new vehicles has General Motors Co. and other major automakers scrambling to boost production to rebuild dealer inventories.
While sales in the quarter were down, the trend was positive as demand increased each month, especially among retail consumers for high-profit sports utility vehicles and pickup trucks, industry officials said. “While the economy has made a substantial rebound in the third quarter, retail auto sales have been even more resilient,” GM Chief Economist Elaine Buckberg said. “Super-low auto loan interest rates have boosted retail auto sales; yet more strength comes from pandemic-induced demand.”
A shortage of available vehicles—a hangover from the car-factory shutdowns this spring—is helping to drive prices higher as car companies and dealers have pulled back on sales promotions and other discounts. Car shoppers on average paid a record $35,655 for a new vehicle in September, up 5.6% from the same month last year, according to research firm J.D. Power. That trend has been helping to boost profitability for many dealers, even as sales hover below previous-year levels.
Jerry Seiner Dealerships in Salt Lake City achieved one of its best third quarters for sales and profitability, Chief Executive Chris Hemmersmeier said. Customers gravitated mostly to new, high-end pickup trucks, which Mr. Hemmersmeier said are still scarce. Yet he worries that without more government stimulus, customers on the lower end of the wage scale will be locked out of the market as the economic effects of the pandemic wear on through the end of the year. “We’re still going to need those customers,” he said.
September sales were boosted in part by the Labor Day holiday weekend, when many dealerships offer discounts to lure customers, but the overall performance points to strong underlying demand for new vehicles, said Thomas King, J.D. Power’s president of data and analytics. “This is despite tight inventory for many of the most popular vehicles.”
Todd Horwitz Chief Strategist BubbaTrading.com
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