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    Toyota Topped G.M. in U.S. Car Sales in 2021

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    After struggling to produce cars because of a global computer chip shortage, automakers are trying to move quickly to making electric vehicles.Toyota Motor unseated General Motors as the top-selling automaker in the United States last year, becoming the first manufacturer based outside the country to achieve that feat in the industry’s nearly 120-year history.That milestone underlines the changes shaking automakers, which face strong competition and external forces as they move into electric vehicles. And it came in a tumultuous and strange year in which automakers contended with an accelerating shift to electric vehicles and struggled with profound manufacturing challenges. New car sales have been damped by a severe shortage of computer chips that forced automakers to idle plants even though demand for cars has been incredibly robust.G.M., Ford Motor and Stellantis, the automaker created by the merger of Fiat Chrysler and Peugeot, produced and sold fewer cars than they had hoped to in 2021 because they were hit hard by the chip shortage. Toyota was not hurt as much.In addition to that shortage, the coronavirus pandemic and related supply-chain problems depressed sales while driving up the prices of new and used cars, sometimes to dizzying heights. Auto manufacturers sold just under 15 million new vehicles in 2021, according to estimates by Cox Automotive, which tracks the industry. That is 2.5 percent more than in 2020 but well short of the 17 million vehicles the industry usually sold in a year before the pandemic took hold.G.M. said on Tuesday that its U.S. sales slumped 13 percent in 2021, to 2.2 million trucks and cars. Toyota had access to more chips because it set aside larger stockpiles of parts after an earthquake and tsunami in Japan knocked out production of several key components in 2011. Its 2021 sales rose more than 10 percent, to 2.3 million.“The dominance of the U.S. automakers of the U.S. market is just over,” said Erik Gordon, a business professor at the University of Michigan who follows the auto industry. “Toyota might not beat G.M. again this year, but the fact that they did it is symbolic of how the industry changed. No U.S. automaker can think of themselves as entitled to market share just because they’re American.”Ford is expected to finish third when the company releases sales data on Wednesday.The shortage of chips stems from the beginning of the pandemic, when auto plants around the world closed to prevent the spread of the coronavirus. At the same time, sales of computers and other consumer electronics took off. When automakers resumed production, they found fewer chips available to them.Despite weak new-vehicle sales, automakers and dealers alike have been ringing up hefty profits because they have been able to raise prices.“Sales volumes are down but our margins are up and expenses are down,” said Rick Ricart, whose family owns Ford, Hyundai, Kia and other dealerships around Columbus, Ohio. “We barely had any inventory cost now. Cars arrive on the truck and they’re already sold. They’re gone within 24 to 48 hours.”Automakers are also contending with the transition to electric cars and trucks. Many companies are spending tens of billions of dollars designing battery-powered models and building plants to produce them. They are racing to catch up to Tesla, which sells a large majority of electric vehicles now.But most established automakers are unlikely to gain ground in U.S. electric vehicle sales this year because they are not in a position to produce many tens of thousands of such cars for at least another year or two.And Tesla, which was founded in 2003, is not standing still. After reporting a nearly 90 percent jump in global sales last year, to just shy of one million, the company plans to start mass production at two new factories this year, near Austin, Texas, and Berlin. It has been less affected by the chip shortage because it was able to switch to types of chips that are more readily available.The electric-car maker does not break out sales by country, but Cox Automotive estimated that it sold more than 330,000 in the United States, or roughly as many vehicles as Mercedes-Benz and BMW each sold here.Ford is perhaps the only major automaker that could pose a serious competitive threat to Tesla this year. This spring, Ford plans to start selling an electric version of its F-150 pickup truck, the top-selling vehicle in the United States. The company has taken more than 200,000 reservations for that truck, the F-150 Lightning, and hopes to produce more than 50,000 this year. It is increasing production at a plant near Detroit to build 80,000 in 2023 and up to 150,000 in 2024.“The F-150 is the most important franchise in our company,” Kumar Galhotra, president of Ford’s Americas and international markets group, said in an interview. “The F-150 Lightning shows how serious our commitment is to the E.V. market.”Ford has been selling a popular electric sport-utility vehicle, the Mustang Mach E, for nearly a year. It said Tuesday that it aimed to increase production of the Mach E to 200,000 vehicles a year by 2023.Other automakers are planning to produce relatively modest numbers of electric cars this year because they and their suppliers are still gearing up to build factories and produce batteries and other components. G.M. has set a goal of producing only electric vehicles by 2035, and on Wednesday it will unveil a battery-powered Chevrolet Silverado pickup truck at the Consumer Electronics Show. But the electric Silverado isn’t expected to go into production until 2023.The Coronavirus Pandemic: Key Things to KnowCard 1 of 3The global surge. More

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    Supply Chain Problems Mean Buying a Car Sometimes Takes a Plane Ride

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    The limited supply of new and used vehicles is forcing some Americans to go to great lengths to find and buy them, including traveling to dealers hundreds of miles away.When Rachael Kasper started shopping for a new car in August, she had her heart set on a Ford Escape plug-in hybrid. The problem was that Ford hasn’t made many of them this year because of a computer chip shortage that has slowed auto production around the world.Ms. Kasper first came up empty in her home state of Michigan and, later, in neighboring states. When she expanded to the East Coast, she found one — at a dealership 537 miles away, in Hanover, Pa.“I flew to Baltimore, took a Lyft to the dealer, and then drove all the way home,” said Ms. Kasper, who owns a water-sports equipment retailer. “It was quite an adventure.”The shortage of computer chips, in large part caused by decisions made in the early days of the pandemic, has rippled through the auto industry this year. Manufacturers have had to close plants for lack of parts, leaving car dealers with millions fewer vehicles to sell.As a result, car buyers have had to travel hundreds of miles to find the vehicles they want, give up on haggling and accept higher prices, and even snap up used cars that have been repaired after serious accidents.The supply squeeze coincides with an apparent increase in demand. Some people are trying to avoid mass transit or taxis. Others simply want a vehicle. Many families have saved thousands of dollars thanks in part to government benefits and stimulus payments and because they have been spending less on travel, restaurant meals and other luxuries that have fallen by the wayside because of health concerns.The end of the year is normally a peak selling season, with some automakers running ads in which cars are presented as gifts complete with giant bows. But this year consumers are finding that locating the car of their desires is not quick, easy or cheap.As Ed Matovcik, a wine industry executive in Napa, Calif., neared the end of his lease on a Tesla Model S, he decided to switch to a Porsche Taycan, a German electric car. He ordered one, but it won’t arrive until May, three months after he has to give up the Tesla.He is planning on renting cars until the Taycan arrives and is looking on the bright side. “It’s a different world now, so I don’t really mind the wait,” he said. “I’m thinking of renting a pickup for a week so I can finally clear out my garage.”The disruption to car production has rippled through the automotive world. For a time in the spring and summer of 2020, rental car companies stopped buying new cars and sold many of their vehicles to survive while travel was restricted. Now those companies are seeking to take advantage of a hot rental market and are scrambling to buy cars, often competing with consumers and dealers.The big discounts and incentives that were once standard features of car-buying in the United States have all but disappeared. Instead, some dealers now add an extra $2,000 or $3,000 on top of the list price for new cars. That has left car buyers fuming, but the dealers who are jacking up prices know that if one customer balks, another is usually waiting and willing.In November, the average price of a new car was a record $45,872, up from $39,984 a year ago, according to Edmunds, an auto-data provider. The average price paid for a used car is now more than $29,000, up from $22,679 in 2020, and Edmunds expects it to exceed $30,000 next year for the first time ever.Because of the rising prices of used cars, some consumers are spending to fix up older vehicles and keep them going for longer. More cars that have been damaged in accidents are getting fixed instead of being declared a total loss by insurers and sent to the scrap yard.“The math has changed on whether a car is totaled,” said Peter DeLongchamps, a senior vice president at Group 1 Automotive, a Houston-based auto retailer that operates its own chain of auto-body shops. “Our parts and service business is very good. We’re seeing more cars getting fixed based on the high used values.”Workers assembled a Jeep Grand Cherokee L at a Stellantis plant in Detroit in June. A computer chip shortage has slowed auto production around the world.Bill Pugliano/Getty ImagesThe auto industry’s chip shortage stems from the start of the pandemic, in the spring of 2020, when automakers closed factories for weeks and cut orders for computer chips and other parts. At the same time, homebound consumers were snapping up laptops, game consoles and other electronics, spurring makers of those devices to increase orders for semiconductors. When automakers resumed production, they found chip suppliers had less production capacity for them.As a result, automakers have produced significantly fewer trucks and cars this year than they had planned. In addition to closing plants, they’ve built vehicles without certain features, such as heated seats and electronics that maximize fuel economy. Tesla dropped power lower-back support in the passenger seat of certain models.The Coronavirus Pandemic: Key Things to KnowCard 1 of 4The Omicron variant. More

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    Chip Shortage Creates New Power Players

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    SAN FRANCISCO — Since 1989, Microchip Technology has operated in an unglamorous backwater of the electronics industry, making chips called microcontrollers that add computing power to cars, industrial equipment and many other products.Now a global chip shortage has elevated the company’s profile. Demand for Microchip’s products is running more than 50 percent higher than it can supply. That has put the company, based in Chandler, Ariz., in an unfamiliar position of power, which it began wielding this year.While Microchip normally lets customers cancel a chip order within 90 days of delivery, it began offering shipment priority to clients that signed contracts for 12 months of orders that couldn’t be revoked or rescheduled. These commitments reduced the chances that orders would evaporate when the scarcity ended, giving Microchip more confidence to safely hire workers and buy costly equipment to increase production.“It gives us the ability to not hold back,” said Ganesh Moorthy, president and chief executive of Microchip, which on Thursday reported that profit in the latest quarter tripled and that sales rose 26 percent to $1.65 billion.Such contracts are just one example of how the $500 billion chip industry is changing because of the silicon shortage, with many of the shifts likely to outlive the pandemic-fueled dearth. The lack of the tiny components — which has pinched makers of cars, game consoles, medical devices and many other goods — has been a stark reminder of the foundational nature of chips, which act as the brains of computers and other products.Chief among the changes is a long-term shift in market power from chip buyers to sellers, particularly those that own factories that make the semiconductors. The most visible beneficiaries have been giant chip manufacturers like Taiwan Semiconductor Manufacturing Company, which offer services called foundries that build chips for other companies.But the shortage has also sharply bolstered the influence of lesser-known chip makers such as Microchip, NXP Semiconductors, STMicroelectronics, Onsemi and Infineon, which design and sell thousands of chip varieties to thousands of customers. These companies, which build many products in their own aging factories, now are increasingly able to choose which customers get how many of their scarce chips.Longer-term purchase commitments from customers “gives us the ability to not hold back,” said Ganesh Moorthy, chief executive of Microchip Technology, at the company’s headquarters.Tomás Karmelo Amaya for The New York TimesMany are favoring buyers who act more like partners, by taking steps like signing long-term purchase commitments or investing to help chip makers increase production. Above all, the chip makers are asking clients to share more information earlier about which chips they will need, which helps guide decisions about how to lift manufacturing.“That visibility is what we need,” said Hassane El-Khoury, chief executive of the chip maker Onsemi, a company previously known as ON Semiconductor.Many of the chip makers said they were using their new power with restraint, helping customers avoid problems like factory shutdowns and raising prices modestly. That’s because gouging customers, they said, could cause bad blood that would hurt sales when shortages end.Even so, the power shift has been unmistakable. “Today there is no leverage” for buyers, said Mark Adams, chief executive of Smart Global Holdings, a major user of memory chips.Marvell Technology, a Silicon Valley company that designs chips and outsources the manufacturing, has experienced the change in power. While it used to give foundries estimates of its chip production needs for 12 months, it began providing them with five-year forecasts starting in April.“You need a really good story,” said Matt Murphy, Marvell’s chief executive. “Ultimately the supply chain is going to allocate to who they think are going to be the winners.”It’s a substantial change in psychology for a mature industry where growth has generally been slow. Many chip makers for years sold largely interchangeable products and often struggled to keep their factories running profitably, particularly if sales slumped for items like personal computers and smartphones that drove most chip demand.But the components are essential for more products now, one of many signs that rapid growth may linger. In the third quarter, total chip sales surged nearly 28 percent to $144.8 billion, the Semiconductor Industry Association said.Years of industry consolidation has also wrung out excess manufacturing capacity and left fewer suppliers selling exclusive kinds of chips. So buyers that could once place and cancel orders with little notice — and play one chip maker off another to get lower prices — have less muscle. More

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    Chip Shortage Makes Big Dent in Automakers’ U.S. Sales

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    General Motors, Toyota, Honda, Stellantis and Nissan reported recent declines as problems in the global supply chain held down output and inventories.Four of the biggest sellers of cars and trucks in the United States said Friday that their sales had plunged recently, reflecting the intense squeeze that a global semiconductor shortage has put on auto production.General Motors, Honda, Nissan and Stellantis reported significant declines in sales in the three months that ended in September — in G.M.’s case, a drop of one-third from a year earlier — as chip shortages forced them to idle plants, leaving dealers with few vehicles to offer customers.Toyota had a slight increase for the quarter, but its sales in September fell sharply after it was forced to slash global production because of the chip shortage and other disruptions to its parts supplies stemming from the coronavirus pandemic.“We are in uncharted waters,” said Alan Haig, president of Haig Partners, an automotive consultant. “We’ve never seen a vehicle shortage like this. There are just not enough cars to sell.”The shortage of semiconductors stems from the beginning of the pandemic, when automakers around the world closed factories for weeks and suddenly cut their orders for computer chips. At the same time, manufacturers of laptops, game consoles and other electronics were demanding more chips as sales of their products took off among homebound consumers.When automakers resumed production, chip makers had much less production capacity to allocate for automotive chips.Strong auto sales, spurred in part by government stimulus checks, helped prop up consumer spending during the first year of the pandemic. But now production delays and depleted inventories are hurting sales when waning government support and the rise of the Delta variant of the coronavirus are acting as a drag on consumer spending.The forecasting firm IHS Markit on Friday lowered its estimate of third-quarter consumer spending growth to an annual rate of just 0.4 percent, down from 12 percent in the second quarter, contributing to a sharp slowdown in overall economic growth.Automakers have tried to use the electronic components they have in stock for their most profitable vehicles, such as pickup trucks and large sport utility vehicles. But in recent months those models have been affected, too.With fewer vehicles rolling off assembly lines, dealers’ inventories have become skimpy. On Friday, Kenosha Toyota in Wisconsin had a single new vehicle for sale — a two-wheel-drive Tacoma pickup. Suburban Chevrolet of Ann Arbor in Michigan was displaying just 11 new models for sale on its website.Despite the shortage, automakers and dealers alike are reaping hefty profits because tight inventories have forced consumers to pay higher prices. J.D. Power estimated that the average selling price of a new vehicle in September was $42,802, up more than $12,000 from the same month in 2020.“It’s a bonanza for the dealers and the factories, despite the shortage of inventory,” Mr. Haig said.With new cars scarce, prices of used cars have also shot up. And the latest sales figures raise concerns that the inventory shortage is worsening and crimping sales.“There are simply not enough vehicles available to meet consumer demand,” said Thomas King, president of J.D. Power’s data and analytics division.At General Motors, sales were down 33 percent in the quarter. The automaker sold 446,997 vehicles, compared with 665,192 light trucks and cars a year earlier. In the same quarter of 2019, G.M. sold 738,638.Honda’s sales were down 11 percent in the quarter, to 354,914 cars and trucks. But a decline in September of nearly 25 percent from the prior year showed the increasing squeeze on production. Stellantis, which was formed by the merger of Fiat Chrysler and France’s Peugeot, reported a 19 percent drop in third-quarter sales. At Nissan, the decline was 10 percent.Toyota said its sales in the quarter were about 1 percent higher than a year earlier, at 566,005. But its sales for September were down 22 percent.General Motors does not report monthly sales figures. Ford is expected to report its third-quarter sales on Monday.The shortage of semiconductors has forced manufacturers to idle plants for weeks at a time. G.M. idled several pickup truck plants for parts of August and September. Toyota cut global production by 40 percent in September, and expects a similar cut in October.General Motors emphasized that a lack of potential buyers was not the problem. “Underlying demand conditions remain strong, thanks to ample job openings, growing pent-up vehicle demand and excess savings accumulated by many households during the pandemic,” Elaine Buckberg, G.M.’s chief economist, said in a company statement.And the company signaled that the chip supply was improving. “We look forward to a more stable operating environment through the fall,” said Steve Carlisle, the president of G.M. North America.At the end of September, G.M. had 128,757 vehicles in dealer inventories, down from 211,974 at the end of June and more than 334,000 at the end of the first quarter. In years past, the figure was often about 800,000.Toyota had 37,516 vehicles on dealer lots at the end of the quarter, and 61,208 at ports serving the U.S. market. At the current sales rate, that is enough to last about 18 days.Ben Casselman More

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    The Car Market 'Is Insane': Dealers Can't Keep Up With Demand

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    Rick Ricart is expecting nearly 40 Kia Telluride sport utility vehicles to arrive at his family’s dealership near Columbus, Ohio, over the next three weeks. Most will be on his lot for just a few hours.“They’re all sold,” Mr. Ricart said. “Customers have either signed the papers or have a deposit on them. The market is insane right now.”In showrooms across the country, Americans are buying most makes and models almost as fast as they can be made or resold. The frenzy for new and used vehicles is being fed by two related forces: Automakers are struggling to increase production because of a shortage of computer chips caused in large part by the pandemic. And a strong economic recovery, low interest rates, high savings and government stimulus payments have boosted demand.The combination has left dealers and individuals struggling to get their hands on vehicles. Some dealers are calling and emailing former customers offering to buy back cars they sold a year or two earlier because demand for used vehicles is as strong as it is for new cars, if not stronger. Used car prices are up about 45 percent over the past year, according to government data published this week. New car and truck prices are up about 5 percent over the past year.Those price increases have fed a debate in Washington about whether President Biden’s policies, particularly the $1.9 trillion American Rescue Plan he signed in March, are responsible for the sharp rise in inflation. The government said this week that consumer prices across the economy rose 5.4 percent in the last year through June.Republican lawmakers have argued that the March legislation is overheating the economy and are citing the rise in prices to oppose additional government spending. But Biden administration officials have pointed out that temporary supply shortages are largely responsible for the surge in prices of cars and other goods.Government stimulus may have helped some consumers, but it is hard to say how much. Several large forces are at play.The chip shortage, for example, is affecting automakers all over the world and is not directly related to U.S. policies. Industry officials blame limited production capacity for semiconductors and pandemic-related disruptions in supply and demand for the shortage.To make the most of limited chip supplies, General Motors has temporarily done away with certain features in some models, like stop-start systems that automatically turn off engines when cars stop for, say, a traffic light. And the French carmaker Peugeot has replaced digital speedometers with analog ones in some cars.Rental car companies that sold off thousands of cars during the pandemic to survive are now in the market to buy cars and trucks. They want to take advantage of a summer travel boom that has driven up rental rates to several hundred dollars a day in some places.“The industry has had strikes and material shortages before that have left us short of inventory, but I’ve never seen anything like this,” said Mark Scarpelli, the owner of two Chevrolet dealerships near Chicago. “Never, never, never.”His dealerships normally have 600 to 700 cars in stock. Now, he has about 50. Once or twice a week, a truck arrives with five or 10 vehicles. The cars disappear quickly because of customer waiting lists, Mr. Scarpelli said.Industry executives said the last time demand and supply were this out of sync was most likely after the end of World War II, when U.S. auto plants returned to making cars after years of churning out tanks and planes.Dealers said virtually everything was selling, from luxury vehicles and sports cars that cost more than $100,000 to basic used cars that many parents buy for teenagers.Even though the unemployment rate is still higher than before the pandemic, many people have money to spend. Government payments have helped lots of people, but many Americans, kept from vacationing or eating out, saved money. Financing cars is also relatively cheap — at least for people with good credit. Some automakers like Toyota, which has been less affected by the chip shortage than others, are advertising zero-interest loans on some cars.Mr. Ricart’s family businesses include a custom shop that sells high-end, special-edition trucks and sports cars. “We had a $125,000 Shelby pickup, and I said, ‘Who’s going to buy that?’” he recalled. “The next day it was gone. There’s so much free cash in the market. People are paying full price, even for the most expensive vehicles we have.”Buyers often have to take vehicles that don’t meet their specifications, and move fast when they find one close enough.Gary Werle, a retiree in Lake Worth, Fla., recently traded in a 2017 Buick Encore for a 2021 version, drawn by its safety features such as blind-spot monitoring and automatic braking. “I’m 80, and I thought it would be good to have those,” he said.On Memorial Day, his dealer called, and Mr. Werle didn’t hesitate. “I was at a party and left to buy the car,” he said. “I’d heard about the shortages, so I wasn’t sure the car would be there the next day.”Dealers are selling fewer vehicles, but their profits are up a lot. That’s a huge change from the spring of 2020, when most dealerships shut down for roughly two months and they had to lay off workers to survive.“The strong demand from consumers paired with a lack of supply from the manufacturers has created a gusher of profits for dealers,” said Alan Haig, president of Haig Partners, an automotive consultant.Now, dealers typically dictate the price of new or used cars. New cars typically sell for the manufacturer’s suggested retail price or, in some cases, thousands of dollars more for models in very high demand. Haggling over used cars is a distant memory.“There’s not a lot of negotiating that goes on right now on price,” said Wes Lutz, owner of Extreme Dodge in Jackson, Mich.Some customers have balked at paying top dollar for new cars and have opted to make do with older vehicles. That has increased demand for parts and service, one of the most profitable businesses for car dealers. Many dealers have extended repair-shop hours. Mr. Ricart said he had some repair technicians putting in 10- or 12-hour days three or four days in a row before taking a few days off.Of course, the shortage of cars will end, but it isn’t clear when.As Covid-19 cases and deaths rose last spring, automakers shut down plants across North America from late March until mid-May. Since their plants were down and they expected sales to come back slowly, they ordered fewer semiconductors, the tiny brains that control engines, transmissions, touch screens, and many other components of modern cars and trucks.At the same time, consumers confined to their homes began buying laptops, smartphones and game consoles, which increased demand for chips from companies that make those devices. When automakers restarted their plants, fewer chips were available.Many automakers have had to idle plants for a week or two at a time in the first half of 2021. G.M., Ford Motor and others have also resorted to producing vehicles without certain components and holding them at plants until the required parts arrive. At one point, G.M. had about 20,000 nearly complete vehicles awaiting electronic components. It began shipping them in June.Ford has been hit harder than many other automakers because of a fire at one of its suppliers’ factories in Japan. At the end of June, Ford had about 162,000 vehicles at dealer lots, fewer than half the number it had just three months ago and roughly a quarter of the stock its dealers typically hold.This month, Ford is slowing production at several North American plants because of the chip shortage. The company said it planned to focus on completing vehicles.Mr. Ricart recently took a trip on his Harley-Davidson to Louisville, Ky., and got a look at the trucks and S.U.V.s at a Ford plant that are waiting to be finished. He said he had seen “thousands of trucks in fields with temporary fencing around them.”He said he hoped to get some of those trucks soon because Ricart Ford had only about 30 F-150 pickup trucks in stock. “We’re used to selling a couple hundred a month.” More

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    Biden Administration Moves to Unkink Supply Chain Bottlenecks

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    A swath of recommendations calls for more investments, new supply chains and less reliance on other countries for crucial goods.WASHINGTON — The Biden administration on Tuesday planned to issue a swath of actions and recommendations meant to address supply chain disruptions caused by the coronavirus pandemic and decrease reliance on other countries for crucial goods by increasing domestic production capacity. More

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    Global Shortages During Coronavirus Reveal Failings of Just in Time Manufacturing

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    Global shortages of many goods reflect the disruption of the pandemic combined with decades of companies limiting their inventories.In the story of how the modern world was constructed, Toyota stands out as the mastermind of a monumental advance in industrial efficiency. The Japanese automaker pioneered so-called Just In Time manufacturing, in which parts are delivered to factories right as they are required, minimizing the need to stockpile them. More