Robert Hughes 

Sales of light vehicles totaled 12.2 million at an annual rate in September, down from a 13.0 million pace in August. The September result was the fifth consecutive decline since posting an 18.3 million rate in April, and fourth straight month below the 16 to 18 million range (see first chart). Sales are about 30 percent below the five-year average rate of 17.2 million through December 2019. Falling auto sales is largely a result of component shortages that have limited production, resulting in plunging inventory and surging prices.

Breaking down sales by origin of assembly, sales of domestic vehicles fell to 9.1 million units versus 9.8 million in August, a drop of 7.4 percent, while imports fell to 3.09 million versus 3.20 million in August, a drop of 3.3 percent. The domestic share came in at 74.6 percent in September versus 75.5 in August (see first chart).

Component shortages, especially computer chips, have disrupted production for most manufacturers, creating a scarcity for many models, leading to lower inventory and higher prices. Ward’s estimate of unit auto inventory came in at 135,900 in August, the lowest on record (see second chart). The Bureau of Economic Analysis estimates the inventory-to-sales ratio ticked up to 0.724 from a record low 0.689 in August (see second chart).

The plunging inventory levels continue to push prices higher. The average consumer expenditure for a car was $31,365 in August while the average consumer expenditure on a light truck rose to $46,296 (see third chart). The August levels represent 12-month gains of 14.9 percent and 11.2 percent, respectively.

As a share of disposable personal income per capita, average consumer expenditures on a car came in at 57.4 percent versus just 41.6 percent in March 2021 while the average consumer expenditure on a light truck as a share of disposable personal income per capita was 84.7 percent versus 64.5 percent as recently as March 2021 (see third chart).