Consumers Pay Whatever it Takes, Vehicle Prices Go Nuts, Dealers Make Record Profits, Whole Mindset Changed. Is This Inflation Temporary? by Wolf Richter

SLL’s betting that inflation will be as temporary as any other temporary government program. From Wolf Richter at wolfstreet.com:

The used vehicle price spike will subside, partially, but the psychological aspects of inflation have set in.

Ford announced on Wednesday that it would cut production at eight US assembly plants in July and into August due to the semiconductor shortage. These production cuts will hit numerous vehicle lines, including the crucial F-150. Due to an “unrelated part shortage,” production of the Ranger mid-size pickup and the Bronco SUV will also be down for three weeks in July. This comes after the company said in April that it would cut its global production by about 50% in Q2, which just ended.

Other automakers have been struggling too with supply chain entanglements and the semiconductor shortage. And the supply crunch continues. Over the next few days, we’re going to see auto sales for June. Auto sales to retail customers had been strong earlier in the year, but June sales were handicapped by widespread inventory shortages of hot models.

Today we’re going to look at prices and profits in June. And there have been huge moves.

Vehicle purchases are discretionary for most people. Most people can wait a year or two or three before buying a new or used vehicle and just keep driving what they have. People did this during the Financial Crisis, and auto sales collapsed and stayed down for years. Today, the opposite is the case: Prices are soaring and consumers – those that are buying, and there are enough of them – are eager to pay mind-boggling amounts.

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