Automotive dealerships 2019–22: dealer markup increases drive new-vehicle consumer inflation

Abstract

The automotive industry is one of the largest manufacturing sectors in the United States. However, the onset of the COVID-19 pandemic brought with it two major shocks to the U.S. automotive industry, which led to major declines in production, sales, and international trade for 2020 and 2021. The first of these shocks--nationwide factory shutdowns--brought production to a short but drastic halt in early 2020 (with over 90 percent of domestic automotive production temporarily shutting down), while the second--shortage of automotive semiconductor chips--created a less drastic, but more prolonged drag on production that continued into 2021 and beyond. This paper explores each of these disruptions independently, examines the impact of both, and concludes with a discussion of the outlook of the automotive industry in 2022 and beyond.