STLA Stellantis NV

By Nora Naughton 

Auto makers are reporting a jump in 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.

General Motors Co. on Thursday posted a nearly 4% increase in its U.S. sales for the January-to-March period, illustrating that its business continues to recover during the pandemic despite supply constraints. The company said it expects auto demand to remain strong throughout the year.

Toyota Motor Corp., which wasn't hit by the chip shortage until later in the quarter, reported a 22% increase in its first-quarter U.S. sales. 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.

Other major auto makers including Ford Motor Co. and Stellantis NV, formerly Fiat Chrysler Automobiles, are also expected to report higher U.S. auto sales for the first quarter, according to car-shopping website Edmunds.com.

Overall, analysts forecast U.S. auto sales will rise roughly 8% for the three-month period, and the industry's annualized selling pace in March could hit 16.5 million vehicles, 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 deep 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 to the prior-year period, 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, and dealers say they are now struggling to restock. New-vehicle demand is only 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.

The tight inventory didn't have much 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, inventory levels were down 26% over the year-earlier period, according to research firm Wards Intelligence. That is near the lows reached last summer when auto makers were only 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.

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 long-awaited vehicles such as the Ford Bronco and Jeep Wagoneer being delayed.

"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 12:17 ET (16:17 GMT)

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