Ford Sales Are Down 33% Amid Ongoing Chip Shortage
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There’s a global semiconductor chip shortage, and Ford is paying the price. August marked a large decline for the automaker’s sales, plummeting to its lowest selling rate since June 2020.
According to CNBC, U.S. sales of Ford’s new vehicles were down 33.1% in August, as compared to August 2020. Moreover, according to Motor Intelligence, the company’s sales pace was down to just 13.09 million vehicles. This represents a sharp decrease from only a few months earlier, as sales hit 18.5 million in April 2021.
“Sales pace” is an industry measure referring to how many cars would have been sold annually if the monthly pace was consistent. August is typically a high sales month, making this decrease even more significant.
Ford’s sales drop was worse than analysts expected. J.D. Power and LMC Automotive predicted a decline of only 13.7% as compared to the previous August. Other analysts forecasted a higher selling rate, predicting that Ford would hit a sales pace of between 13.1 million and 14.4 million new vehicles this August.
Nearly every Ford vehicle suffered a sales decrease this August.
Ford sales decrease due to semiconductor chip shortage
This drop in sales is due to a shortage of semiconductor chips, which has been very bad news for the automotive industry.
The chip shortage began last spring, when vehicle assembly plants were forced to close due to the COVID-19 pandemic. Unfortunately for the automotive industry, chip suppliers rerouted their chips from automakers, selling them instead to companies in other sectors that were less likely to suffer sales drops due to the lockdown.
Not only has this semiconductor shortage caused a huge drop in vehicle sales, it has also contributed to soaring vehicle prices. 2021 is proving to be a difficult year for buying a new car. In fact, new cars are now valued at an average of $42,000, an industry “all time high,” according to CNBC.
Consultants from AlixPartners have forecasted that overall, the chip shortage will cause the automotive industry to suffer a $110 billion drop in revenue globally this year.
Almost every Ford vehicle is on the decline
For Ford, August has been an all-round bad month. The automaker’s sales plummeted by a total of 124,176 vehicles.
Nearly every Ford vehicle suffered a sales decrease this August, with the company’s F-Series pickup trucks, usually a bestseller, taking a 22.5% sales hit. Only a few vehicles, such as the new Bronco SUV, were able to achieve a slight increase in sales pace.
Ford’s car sales suffered most, dropping 86% between August 2020 and August 2021. Trucks and SUVs were hit less hard, though sales still fell significantly, with the categories taking respective 30% and 25.3% hits.
To add insult to injury, only one day before announcing the drop in sales, Ford reported that it wouldn’t be going forward with production of several high-selling vehicles, including its F-150 pickup truck, due to the chip shortage.
Not all news is bad, however. Andrew Frick, vice president of Ford Sales U.S. and Canada, reported that Ford’s retail sales had increased by 6.5% from July. Admittedly, he added that the sales were still 33% lower than they had been last August.
Automotive sales on the whole are suffering
Some U.S. dealers, including Subaru and Honda, reported an August sales pace that had declined by a double digit percentage from last year—though their losses were less significant than Ford’s. Other automakers, including Volvo, Hyundai, Toyota, and Kia, suffered only slight losses this month.
According to Thomas King, president of the data and analytics division at J. D. Power, car dealers are currently stocking an average inventory of 942,000 vehicles intended for retail sales. For context, before the pandemic, dealers were stocking an average of 3 million.
King told CNBC, “Although inventory is arriving at dealers daily, it is simply replacing the vehicles being sold, preventing dealers from increasing inventories to a level necessary to support a higher sales pace.” This inventory drop is largely due to the chip shortage, which has proved catastrophic for the industry.