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Chip shortage raises vehicle prices, cuts sales

DETROIT (AP) — U.S. new vehicle sales fell more than 21 percent in the second quarter from a year earlier as a global semiconductor shortage is causing production problems for the industry.

Yet demand still outstrips supply from April to June, with gasoline at $5 per gallon, even with high inflation and rising interest rates. Short supply has driven prices to record levels, driving many consumers out of the new-vehicle market.

Edmunds.com said automakers sold 3.49 million vehicles in the quarter, down about 933,000 from the same period last year.

JD Power estimates the average new vehicle sales price for the first six months of the year hit about $45,000, up 17.5 percent from a year ago. Edmunds.com reports that 12.7 percent of consumers who financed a new vehicle in June had monthly payments of $1,000 or more.

Watch: The Senate will debate a bill to help build domestic technology supply chains amid a shrinking economy

At General Motors, which reported a 15 percent sales decline, shortages of chips and other parts forced the company to build 95,000 vehicles without one part or another. The incomplete vehicles are expected to be completed and sold by the end of the year.

Jack Hollis, head of Toyota sales in North America, said the chip shortage did not improve as much as the company had hoped for in the first half of the year, and he doesn’t see it getting much better until next summer.

“Every microchip producer is producing at peak speed because they have peak demand,” Hollis said. “Nothing is happening. It is actually falling behind.

Toyota sales fell 19 percent in the first half of the year, and they fell 18 percent in June. That allowed GM to overtake the Japanese company and reclaim the crown as the best-selling automaker in the US, which it lost to GM last year.

Stellantis, formerly Fiat Chrysler, posted a 16 percent sales decline. Honda’s second-quarter sales fell by more than half, with the company blaming “severe” supply chain problems. Nissan sales fell nearly 39 percent in the quarter, and Hyundai posted a 23 percent sales decline.

Most automakers are reporting sales figures on Friday, but Tesla is likely to do so this weekend and Ford won’t until Tuesday.

Edmonds predicted that about 3.5 million new vehicles were sold in the US last quarter, down 20.8 percent from a year earlier. Edmonds expects inventory shortages to continue for the foreseeable future, leaving vehicle buyers frustrated.

“The majority of consumers buying vehicles under these conditions are in financial situations where money is less of a consideration or are doing so out of sheer necessity,” said Edmonds analyst Jessica Caldwell.

Toyota’s Hollis said demand has been exceptionally strong, particularly for its more efficient gas-electric hybrid vehicles and for the company’s electric vehicle, the BZ4x. Hybrids and plug-ins accounted for about 27 percent of Toyota’s sales in June, following an upward trend, he said.

Watch: Intel plans to build a $20 billion chip facility in Ohio

But supply issues are limiting inventory and sales, Hollis said. The company started June with 9,000 vehicles on dealer lots and ended the month with about 8,500, he said. Vehicles are being sold within 36 hours of arrival at dealers.

Hyundai announced it will stop selling its Xcent and Veloster small cars in the US, adding to the automaker’s trend of cutting car models as SUVs are America’s favorite body style.

Randy Parker, head of sales at Hyundai Motor America, said he expects the chip shortage to gradually improve this year, predicting a 30 percent increase in production from last year.

The company’s flagship electric vehicle, the Ioniq 5, is selling strongly, with about 7,500 delivered in the second quarter, Parker said.

But smaller, fuel-efficient gasoline vehicles aren’t doing so well. Hyundai’s Elantra compact car saw sales rise 44 percent in the quarter, but sales were temporarily halted due to safety recall issues.

Honda’s Civic sales fell 54 percent in the first half, and Toyota’s Corolla compact car sales fell 25 percent from January to June.

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