Semiconductor shortage is getting close to peaking: Expert

Jeff Schuster, LMC Automotive President of Americas Operations and Global Vehicle Forecasts, joins Yahoo Finance to discuss the impacts of the semiconductor shortage and Toyota’s beat over General Motors.

Video Transcript

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ALEXIS CHRISTOFOUROS: Welcome back to "Yahoo Finance Live." The global computer chip shortage has cost the auto industry billions of dollars in lost revenue. But some smart planning by Toyota helped the Japanese automaker come out on top in the second quarter, beating GM for the very first time when it comes to US sales.

Joining us now is Jeff Schuster. He is the president of America's operations and global vehicle forecasts at LMC Automotive. Jeff, it's good to have you here. Before we talk about Toyota specifically, just paint the broader picture for us. How has the computer chip shortage started to impact auto sales here in the US?

JEFF SCHUSTER: Well, thanks for having me. No question about it. We started to see the impact last month. We had been running really hot. The industry was on pace, really, for a record year. If we look back, March, April and even May was above a 17 million unit selling rate. We saw that dip to around 15.4 million units last month. So certainly saw the industry take a breather from the recovery that it was on. And that is solely to do with the chip shortage, which has caused inventory on dealers' lots to be extremely lean, if existent at all.

KRISTIN MYERS: So I think that the next question is how long do you anticipate these shortages continuing?

JEFF SCHUSTER: It's something that we think is getting close to peaking in terms of the problems at production facilities. However, we've lost about a million units in the North American market already as far as production goes and about 3 million units globally in production. And we don't anticipate much of that getting made up. In fact, right now about 750,000 units is all we expect to get back.

So really, what that means is the problem we're facing right now for the industry, and inventory shortages specifically to the US market, it's going to be with us well into 2022, at least through the first half, and it may even spill into the second half before we see what we consider normal inventory levels for dealers.

ALEXIS CHRISTOFOUROS: So let's talk a little bit about Toyota here. I mean, talk about foresight. They stockpiled the chips, Jeff. Do they normally do this? Is this sort of par for the course for Toyota, or did they know something perhaps the rest of the industry didn't know and so they started to stockpile?

JEFF SCHUSTER: I don't know if it's necessarily normal. I think different companies clearly have been affected differently across the globe. Toyota is sitting in a very strong position from a chip standpoint and from a disruption in their production both here in North America but also in Japan and abroad.

In fact, they've had very little shortages or very little losses due to shortages of chips. They've had some other disruptions here in North America but very, very little. So that position and that decision that they made to stockpile chips or maybe have an early indication through their strong supply chain network that they've established in Japan, maybe given that early indicator.

Others have fared in between Toyota. At least in North America, the one that's been impacted the most has been Ford. Launching the new F-150 has been a challenge for Ford.

KRISTIN MYERS: So Toyota seems to really paint this off as a one-off, essentially, topping GM in terms of those sales. However, I know that you're saying that that chip shortage has hit a peak but is going to continue for some time. Do you think that perhaps it's not actually a one-off and those ship shortage woes are going to continue to weigh on GM, especially as they try to go up against some of these other automakers, and folks that are out there buying cars have to turn to competitors in order to get some of these cars?

JEFF SCHUSTER: Yeah. I mean, certainly, it's going to be impacting all automakers to some degree going forward. And GM, actually, is in a fairly strong position. They have restarted all but one factory here in North America. So their disruptions, I think, or at least a majority of them are behind. I think we're going to see, likely, some sporadic plants that are going to have to be taken offline temporarily for shortages like that.

There's other materials that could become short as well. So again, I think it's going to be something that'll have to be managed on a daily, if not hourly basis going forward. And it's going to take some time to rebuild that inventory. So yes, certainly, we may see this happen again in a month. But GM is in a fairly strong position going forward now that their plants have restarted.

ALEXIS CHRISTOFOUROS: And Jeff, in about 30 seconds here, would love your take on the effect high gas prices might have on some of these gas-guzzling cars like an F-150 pickup, which seems to do well regardless of gas prices. But we've got now gas at its highest level in years. Experts are saying it will probably go up a little bit more from where it is now towards the end of the summer. What's the impact, do you think, on auto sales?

JEFF SCHUSTER: Yeah. I think, historically speaking, when we go back to 2008, when we saw gas prices 4, 4.50 a gallon, that's when we saw a major impact to larger vehicles. But I think a key point back then is we had an array of small cars that were available that just aren't around any longer. So the likelihood of going back down and shifting down to small compact cars is small. But I think we could and likely would see a shift to smaller SUVs or crossover utility vehicles.

So in other words, the larger vehicles in favor of something in the midsize or even smaller SUV arena, that's likely a shift that we could see take place. The other area that it could reignite interest in and something that's been getting a lot of attention as well is electrified or electric vehicles. So better electric vehicles are certainly on the rise. We're seeing a lot more available products. And this could jumpstart that as well.

ALEXIS CHRISTOFOUROS: We're seeing more of those charging stations too. All right, Jeff Schuster of LMC Automotive, thanks so much for being with us.