According to AutoNation CEO Mike Jackson, supply chain issues that have ravaged the industry over the past year will not be solved until 2022.
Ford, General Motors and Toyota were forced to cut production this year as supply chain disruptions due to the COVID-19 Pandemic resulted in a global chip shortage.
It is a force majeure at the moment because the chips simply are n't there and they wo n't be there compared to demand for some time, said Jackson on his first earnings call on Tuesday.
The industry was already dealing with a production shortfall after plants were forced to shut down in the early days of the COVID 19 lockdowns for up to two months. The impact of lower production has been exacerbated as more people had worked from home and avoided public transportation during the pandemic.
On April 12, Biden and executives from Detroit's Big Three automakers met to discuss ways to address the chip shortage. On the same day Intel and Biden announced the plans to deal with the problem with the hope of moving production forward.
Jackson expects that even with those efforts, there will be more demand than supply for the remainder of this year.
He noted that it has been very interesting to see the number of new car shipment shipments that are presold. The supply issues have caused AutoNation to adjust its strategy to attract good front-end margins on used cars and volume on new cars, which have seen their cost increase by 17% from last year.
Supply constraints have not resulted in lower sales; the Fort Lauderdale, Florida-based AutoNation, which reported on Tuesday that new car unit sales in the U.S. from a year ago increased 22% and were 12% compared to the first quarter of 2019.
Same-store used vehicle sales increased from last year to 20% compared to the first quarter of 2019. Overall, revenues were up 51% year over year to$ 5.90 billion.
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Net income from continuing operations surged 184% to$ 233.8 million or$ 2.79 share.
The company had earnings of$ 82.4 million, or 91 cents per share, the year before. From Monday, autonation shares were up 40% year to date, and outperformed the S& P 500's 11% gain.