Still the weirdest car market ever.
By Wolf Richter for WOLF STREET.
Inventory shortages at new vehicle dealerships continue unabated, and inventory remains desperately low, but shortages are shifting, as demand has changed, and supply is now piling up, for example at dealerships Ram, while fuel-efficient vehicles are basically sold out. , and EV models have long waiting lists – as people are tired of being hammered by high fuel prices.
The number of new vehicles “in stock” on dealer lots and “in transit” to dealerships fell to 1.12 million vehicles at the end of June, down 70%, or 2.61 million vehicles, from compared to the same period in 2019, according to estimates by Cox Automotive, based on its Dealertrack data. On this basis, new vehicle inventories have not improved since December. For comparison, in 2019, the stock of new vehicles averaged 3.66 million vehicles.
The term “inventory” represents what is “in stock” and what is “in transit”. And that can include units that have been pre-sold. A dealership’s website typically displays three labels next to vehicles in its inventory: “in stock”, “in transit” and “sold”.
The relentless soaring prices of new vehicles.
The average asking price (listing price) shows that dealers aren’t in the mood to bid yet. The average listing price in June rose 11.5% from a year ago, to a record $45,976, according to Cox Automotive.
Cox also said that in the last week of June, asking prices “started to pull back slightly.” So maybe the dealers are running into a bit of price resistance in some corners of the market.
Asking prices fell in January, February and March, only to turn around in April – and some of that was seasonal as January and February are the worst months for dealers, when volume tends to dip after the frenzy of december. In June, they hit a new high, up 11.5% year-on-year. This again speaks of an undersupplied warm market:
The average transaction price — the price at which vehicles were sold and delivered — jumped 14% year-over-year, to a record high of $45,844 in June, according to JD Power data. Compared to June 2019, this was up 36% or over $10,000.
At these prices, dealers made record gross profits per vehicle delivered. Including finance and insurance (F&I) sales, dealerships averaged $5,123 in gross profit per vehicle, up $1,174 from already high levels in June 2021, according to JD estimates. Power.
The graph shows the ATPs for December and June of each year. Before the pandemic, there was an established seasonality, where the ATP peaked in December but dropped from there to June every year. But in June 2020, the June ATP was at December level for the first time. And in 2021 and 2022, the ATP just jumped from December to June without taking seasonality into account. The green line connects the Decembers:
Shortage of fuel-efficient vehicles. No shortage at Dodge & Ram dealerships.
Abundant supply at Dodge and Ram dealerships: Including in stock and in transit, Dodge dealerships ended June with a 90-day supply and Ram dealerships with an 81-day supply. The industry considers 60 days to be between tight and sufficient.
Fuel efficient vehicles mostly out of stock. At the bottom of the offering in the non-luxury segments were Asian brands with fuel-efficient models that were essentially sold out: Toyota Corolla, Kia Telluride, Toyota Camry, Hyundai Palisade and Kia Sportage.
At the bottom of the offer by segment:
- Hybrids, 17 day supply
- Intermediate Cars, 22 Day Supply
- Compact cars: 24 day supply.
Full-size pickup supply increases: At the top of the 30 best-selling models were three pickup trucks and two SUVs: the Ram 1500 (79 days), the Ford Escape (69 days), followed by the Jeep Compass, the Ford F-150 and the Chevrolet Silverado.
It’s now a new inventory problem: bad inventory. In 2020 and 2021, pickup trucks were especially hard to get, and everyone wanted them. But then gas prices skyrocketed, and suddenly the cost of refueling became one of the buying considerations, and pickup trucks lost their edge. Demand has shifted towards more fuel-efficient vehicles.
But due to long and complex supply chains, automakers cannot pivot instantly with changes in demand. And the supply problems, triggered by the shortage of semiconductors, have taken on a new dimension through this shift in demand towards more fuel-efficient models for which the automakers were not prepared.
Used vehicles: Abundance.
The stock of used vehicle dealers, at 2.46 million vehicles at the end of June, increased by 5.5% compared to a year ago. Compared to 2019, it was only down 10%.
But sales have been down for months, compared to 2021 and 2019, as buyers have started to resist the sky-high prices. And the supply of days at the end of June, given the drop in the pace of sales, increased slightly to 49 days, a little above the 2019 average (48 days).
Used vehicles: crazy price spike runs out of fuel.
Between December 2019 and December 2021, over these two years, the average asking price for used vehicles increased by 42%, or $8,300 per vehicle, from $19,871 in December 2019 to $28,205 in December 2021, which was absolutely insane, and that’s when the resistance finally started kicking in.
In June, the average asking price dropped to $28,012, just a little below December. Declines in January, February and March are seasonally normal, but declines in May and June are not. And at first glance, the crazy price spike could finally be running out of fuel.
But there is still no oversupply. The influx into the market of used vehicles from rental fleets has been tempered by shortfalls in the production of new vehicles for rental fleets, and they are slower to renew their fleets. And wholesale prices, although they have fallen from the peak through December, are still very high. In this environment, dealers are not yet motivated to lower prices with all their weight to get the iron moving. But at least the price spike is running out of fuel.
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