How will the semiconductor shortage affect inventory levels in 2021? – Jessica Caldwell, Edmunds

In this segment of CBT News, host Jim Fitzpatrick is joined by Jessica Caldwell, Executive Director of Industry Insight for Edmunds. Caldwell joins the show to discuss rising transaction prices for new vehicles, the used-vehicle market, and the semiconductor shortage.

Caldwell begins by looking back at 2020 and where the automotive market currently stands. She says the industry is currently facing a unique challenge with the uncertainty associated with the semiconductor shortage. Caldwell says there are fewer customers shopping for vehicles compared to the last two years, however, the ones who are shopping are buying more expensive vehicles. The average transaction for a new vehicle surpassed $40,000 at the beginning of 2021 and has shown no signs of slowing down. 

Caldwell says the rise in vehicle transactions shows how sporadic the impact of the pandemic has been on consumers. While some consumers have come through the pandemic with little to no income change, others have been completely devastated. Because of the changes made by OEMs, car buyers don’t have many options when it comes to affordable new vehicles. For this reason, a large portion of car buyers has opted to buy more used vehicles.

According to Caldwell, it’s hard to forecast a SAAR at this point in the year. She says that the semiconductor shortage puts a fog over inventory levels and makes it difficult to nail down a truly accurate SAAR.

Caldwell concludes the conversation by discussing the used-car market. She says that 2021 could be a strong year for used vehicles, however, there might be an inventory shortage in that market as well. Most inventory for the used-vehicle market comes from trade-ins, which haven’t been consistent over the last twelve months.

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