Car sales plummeted in the spring, causing shipment lots to overfill and forcing cargo ships to hold new vehicles at sea for weeks. And with few sales and facing state shutdown orders, auto manufacturers like Ford Motor and General Motors halted production lines.
It was starting to look like another automotive crisis.
But fast-forward to August, where monthly vehicle sales were nearly 1.4 million—matching pre-pandemic sales of February and almost double the 745,353 vehicle sales in April. That’s what you call a V-shaped recovery.
The rebound was so fast that new and used vehicles skipped right from oversupply to shortage—which is driving up prices. The average list price of new vehicles in August is $39,410, up $807 from May, according to Edmunds.com. While the average price in August for used vehicles is $21,843, up $920 from May.
“In the second quarter, every major auto manufacturer shut down production—for the first time since World War II—which led to inventory shortages that are still being felt today,” Jared Allen, vice president of communications of the National Automobile Dealers Association told Fortune. “On top of that, the shortage of new-vehicle inventory has pushed many buyers to the used-car market, where supply is also low. The result is a significant increase in prices for used vehicles, as well.”
The combination of an improved economy—and older Americans trying to avoid public transportation during the pandemic—is driving up sales at auto dealerships. And it’s pushed inventory numbers for new vehicles to an eight-year low, according to Wards Intelligence.
When will auto production catch back up?
“We expect this to be temporary … barring any unexpected parts delays or vehicle plant shutdowns stemming from new COVID-19 outbreaks, we expect that vehicle inventory levels will be at close to normal levels,” Allen says. Beyond cars, the economy at large is facing widespread shortages caused by the production shutdowns in the spring and resurgent demand in the summer. Everything from lumber, coins, ammo, beef, to medical supplies has been affected.
Shortages might bring higher prices for consumers, but on the flip side it means plenty of business for manufacturers.
More must-read finance coverage from Fortune:
- Meet Snowflake, one of the buzziest tech IPOs ever
- Book recommendations from Fortune’s 40 under 40 in finance
- Commentary: Why the Democratic Party must make a clean break with Wall Street
- ADP, the biggest U.S. payroll service, won’t implement Trump’s “tax holiday” for some clients
- Fortune’s 2020 40 Under 40