• Automakers are reporting strong vehicle sales buoyed by consumer demand in the first quarter despite an ongoing semiconductor chip shortage shuttered some assembly plants.
• Analysts expected first-quarter auto sales to be up about 8% or 9% compared with the first quarter of 2020. But many automakers are outperforming those forecasts.

DETROIT – Automakers are reporting strong vehicle sales buoyed by consumer demand in the first quarter as fleet sales struggled and an ongoing semiconductor chip shortage shuttered some assembly plants.

Analysts forecasted sales across the industry would be up about 8% or 9% compared with the first quarter of 2020, when Covid-19 started forcing dealerships and auto plants to shutter in March. But many automakers are outperforming those forecasts despite the difficult circumstances.

Automakers that are less reliant on fleet sales to corporate and government clients in the U.S. had better sales in the first quarter. The Detroit automakers experienced single-digit improvements in sales compared to the first quarter of 2020, while non-domestic automakers reported significant increases.

They include: Volkswagen, up 21%; Toyota Motor, up 21.6%; Hyundai Motor, up 28%; and Kia Motors, up 22.8%. Stellantis – the merged automaker of Fiat Chrysler and France-based Groupe PSA – reported a 5.1% increase in sales, including a 25% increase in retail sales. Ford Motor said its first-quarter sales were up 1%. General Motors' sales were up 3.9%.

"For the domestic automakers, they're showing a bit more modest increases," Jessica Caldwell,  executive director of insights at Edmunds.com, told CNBC. "It looks like they're really affected by the fleet opportunity being down because of the limited inventory."

GM said retail sales to individual consumers increased 19% in the first quarter, while fleet sales to corporate and government clients declined 35% from a year earlier. The automaker expects consumer demand to remain resilient throughout this year.

"Consumer confidence and spending will continue to increase due to stimulus, rising vaccination rates and the progressive reopening of the economy," GM's chief economist, Elaine Buckberg, said in a release. "Auto demand should remain strong throughout the year."

Semiconductor shortage

Automakers and parts suppliers began warning of a semiconductor shortage late last year after demand for vehicles rebounded stronger than expected following a two-month shutdown of production plants last spring due to the coronavirus pandemic.

Semiconductor chips are extremely important components of new vehicles for infotainment systems, power steering and brakes, among other systems. The parts can contain several sizes and different types of chips.

"This chip shortage is impacting everybody. We're not an exception," Jose Munoz, CEO of Hyundai North America, said Thursday on CNBC's "Squawk on the Street." "We hope that if in the next four to five months, the situation gets better, perhaps Q3, Q4 will see a recovery. But for the time being we have to manage very carefully and try to optimize as we are doing so far."

Hyundai has been less impacted by the chip shortage than others such as the Detroit automakers, each of which has announced substantial production cuts to domestic plants.

Most recently, Ford announced plans Wednesday to cut production at six plants in North America due to the problem, including facilities that produce highly profitable pickup trucks.

Consulting firm AlixPartners estimates the chip shortage will cut $60.6 billion in revenue from the global automotive industry this year.

Tight inventories

Production cuts from the chip shortage have led to lower vehiclnventories, which were already tight for many popular models due to plant shutdowns last spring to reduce the spread of Covid-19.

Edmunds estimates new vehicle inventory on sale at dealerships nationwide fell by 36% last month compared to a year ago.

"The inventory issue looks like it's not going to be resolved anytime soon," Caldwell said. "It's all going to affect sales later in the year," Caldwell said. "If it's May, July, August, those are all volume months. Not necessarily having that inventory in place is going to hurt."

For the time being though, tighter inventories on popular models such as pickup trucks and SUVs have led to rising new vehicle prices. Edmunds forecasts that the average transaction price for new vehicles climbed to $40,563 in March compared to $38,601 a year ago.