Carmakers struggle to keep up with demand for small cars

In a particularly bleak sales month in June, there were some surprising numbers hidden deep in the sales reports. A month ago, sales of small cars like the Honda Civic, Ford Focus and Toyota Corolla all had record sales. All three of those cars had major drops in June, even though gas prices continued to rise above $4 a gallon. The main reason sales of those and other cars - including hybrids - dropped is that there simply aren't enough available. In general, car dealers try to keep about a 60-day supply of each model they sell in stock. That gives a buffer against supply interruptions and moderate increases in sales as well as providing a reasonable selection of option and color combinations for consumers.

Through April and May, sales of small cars were so strong that inventories of small cars were almost completely depleted. By the end of June, Toyota only had a 15-day supply of Corollas and 7-days worth of Yaris models. On the hybrid front, Toyota had essentially no Priuses or Camry hybrids in stock anywhere. At the beginning of June, (end of June figures aren't yet available) Ford had only a 24-day supply of Focuses while Honda had a 20-day supply of Civics. Automakers are scrambling right now to shift production capacity with Ford adding a third shift to the current Focus assembly plant while working on shifting the Explorer plant to Focus production. Toyota is also adding capacity for Camrys at its Princeton, Indiana plant and Honda is surely looking for more Civics as well.

[Source: Reuters]

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