New vehicle is stuck almost at a record low, the shortage is shifting to fuel-efficient cars, prices have reached a record. But the prices of used cars run out of fuel in plenty of supplies

Still the strangest car market ever.

By Wolf Richter for WOLF STREET.

The stock shortage at new vehicle dealers continues unabated, and inventory remains desperately low, but shortages are shifting as demand has changed and is now accumulating, for example at Ram dealers, while fuel-efficient vehicles are largely 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” at dealerships and “during transport” to dealers fell to 1.12 million vehicles at the end of June, down by 70%, or by 2.61 million vehicles, from the same period in 201[ads1]9, according to estimates from Cox Automotive, based on their Dealertrack data. On this basis, the stock of new vehicles has not improved since December. In comparison, in 2019 the average number of new vehicles was 3.66 million vehicles.

New vehicle is stuck almost at a record low, the shortage is shifting to fuel-efficient cars, prices have reached a record.  But the prices of used cars run out of fuel in plenty of supplies

The term “inventory” stands for what is “in stock” and what is “during transport”. And that may include devices that are pre-sold. A dealer’s website usually shows three labels next to the vehicles in their inventory: “in stock”, “in transport” and “sold”.

The relentless rise in prices for new vehicles.

Average price estimate (listing price) shows that retailers are not in the mood to offer deals yet. The average listing price in June rose 11.5% from a year ago, to a record high of $ 45,976, according to Cox Automotive.

Cox also said that during the last week of June, price hints began to recede slightly. So maybe maybe maybe, retailers encounter only a bit of price resistance in certain corners of the market.

Demand fell in January, February and March, only to make a U-turn in April – and part of this was seasonal as January and February are the worst months for retailers, when volume tends to plummet from December binge . In June, they broke a new record, up by 11.5% from year to year. This is still talking about a hot underperforming market:

Average transaction price – the price at which the vehicles were sold and delivered – increased by 14% from year to 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, the dealers achieved a record gross profit per delivered vehicle. Including financial and insurance sales (F&I), dealers earned an average of $ 5,123 in gross profit per vehicle, up $ 1,174 from the already high levels in June 2021, according to JD Power estimates.

The chart shows ATPs for December and June each year. Before the pandemic, there was an established seasonal variation, where ATP reached a peak in December, but fell from there to June each year. But in June 2020, ATP in June was on a par with December for the first time. And in 2021 and 2022, ATP only jumped from December to June without regard to seasonal variations. The green line connects December:

Lack of fuel efficient vehicles. No shortage of Dodge & Ram dealers.

Abundant supply at Dodge and Ram dealers: Including in stock and during transportation, Dodge dealers ended June with 90 days supply, and Ram dealers with 81 days supply. The industry considers 60 days as ideal between tight and adequate.

Fuel-efficient cars are almost out of stock. At the low end of the offering in the non-luxury segments were the Asian brands with fuel-efficient models that were mainly sold out: Toyota Corolla, Kia Telluride, Toyota Camry, Hyundai Palisade and Kia Sportage.

At the low end of offers by segment:

  • Hybrids, 17 days supply
  • Medium-sized cars, 22 days supply
  • Compact cars: 24 days supply.

The supply of full-size pickups is growing: At the high end of the 30 best-selling models were three pickups and two SUVs: Ram 1500 (79 days), Ford Escape (69 days), followed by Jeep Compass, Ford F-150 and Chevrolet Silverado.

This is now a new inventory problem: incorrect inventory. Throughout 2020 and 2021, pickups were particularly difficult to obtain, and everyone wanted them. But then gas prices rose, and suddenly the cost of filling one of the purchase considerations, and pickups lost the advantage. Demand turned to more fuel-efficient vehicles.

However, due to the long and complex supply chains, car manufacturers can not immediately turn around with changes in demand. And the supply problems, triggered by the semiconductor shortage, have taken on a new dimension through this shift in demand for more fuel-efficient models that car manufacturers were not prepared for.

Used vehicles: Abundant supply.

The inventory of used car dealers, of 2.46 million vehicles at the end of June, was up 5.5% from a year ago. Compared to 2019, it was only down 10%.

But sales have been lower for several months, compared to 2021 and until 2019, as buyers have begun to resist the sky-high prices. And days of supply in late June, given the lower sales rate, increased to 49 days, just slightly above the 2019 average (48 days).

Used vehicles: Insane price increases run out of fuel.

Between December 2019 and December 2021, during these two years, the average price estimate for used vehicles increased by 42%, or by $ 8,300 per vehicle, from $ 19,871 in December 2019 to $ 28,205 in December 2021, which was completely wrong, and this is where the opposition finally began to strike.

In June, the average price estimate fell to $ 28,012, just below December. The decline in January, February and March is seasonally normal, but the decline in May and June is not. And as it turns out, the completely crazy rise in prices may have finally run out of fuel.

But there is still no oversupply. The influx to the used car market from rental fleets has been dampened by a lack of production of new vehicles for rental fleets, and they are slower to sell their fleets. And wholesale prices, although they have fallen from the top through December, are still sky-high. In this environment, retailers are not yet motivated to cut prices by a whole bunch to move the iron. But at least the price increase has run out of fuel.

Do you enjoy reading WOLF STREET and would you like to support it? By using ad blockers – I understand why – but do you want to support the site? You can donate. I really appreciate that. Click on the beer and ice cream mug to find out how:

Would you like to be notified by email when WOLF STREET publishes a new article? Sign up here.

Source link

Back to top button