Still the weirdest car market ever.
By Wolf Richter for WOLF STREET.
New vehicle dealer inventory shortages continue unabated, and inventories remain extremely low, but shortages are changing, as demand has shifted and supply is now piling up, for example at Ram dealers, while fuel-efficient vehicles are basically Solden. , and EV models have long waiting lists – as people are tired of being hit by high fuel prices.
The number of new vehicles “in stock” on dealer lots and “in transit” for dealers decreased to 1.12 million vehicles at the end of June, down 70%, or 2.61 million vehicles, from the same period in 2019 , according to Cox Automotive estimates, based on its Dealertrack data. On that basis, new vehicle inventories have not improved since December. By comparison, in 2019, new vehicle inventory averaged 3.66 million vehicles.
The term “inventory” accounts for what is “in stock” and what is “in transit.” And may include units that have been pre-sold. A dealer’s website typically shows three tags next to the vehicles in their inventory: “in stock,” “in transit,” and “sold.”
The relentless rise in the price of new vehicles.
Average asking price (listing price) indicates that dealers are not yet available to offer deals. The average listing price in June rose 11.5% from a year earlier to a record $45,976, according to Cox Automotive.
Cox also said that during the last week of June, asking prices “started to pull back a little bit.” So, maybe just maybe, traders are facing just a little 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 traders, when volume tends to drop from December’s frequency. By June, they hit a new record, with an 11.5% year-over-year increase. This still speaks to a hot under-supplied market:
Average transaction price — the price at which vehicles were sold and delivered — rose 14% year over year to a record $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 sales (F&I), dealers made an average of $5,123 in gross profit per vehicle, up $1,174 from already high June 2021 levels, according to JD Power estimates.
The chart shows the ATPs for December and June of each year. Before the pandemic, there was an established seasonality, with ATP peaking in December but falling from there in June each year. But in June 2020, ATP in June was equal to December for the first time. And in 2021 and 2022, the ATP just jumped from December to June regardless of seasonality. The green line connects the decimals:
Lack of fuel efficient vehicles. There is no shortage of Dodge & Ram dealers.
Ample Supply at Dodge and Ram Dealers: Including in-stock and in-transit, Dodge dealers ended June with a 90-day supply and Ram dealers with an 81-day supply. The industry considers the ideal 60 days between narrow and sufficient.
Fuel-efficient vehicles are essentially powerless. At the low end of the lineup in the non-luxury segments were Asian brands with fuel-efficient models that were basically out of stock: Toyota Corolla, Kia Telluride, Toyota Camry, Hyundai Palisade and Kia Sportage.
At the low end of supply by segment:
- Hybrids, 17 days supply
- Medium cars, 22 days supply
- Compact car: 24 day supply.
The supply of full-size pickup trucks is growing: Topping the 30 best-selling models were three pickup trucks 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: wrong inventory. Throughout 2020 and 2021, pickup trucks were especially hard to come by and everyone wanted them. But then gas prices went up and suddenly the cost of filling up became one of the purchase considerations and haul trucks lost their edge. Demand turned to more fuel efficient vehicles.
But because of long and complex supply chains, automakers can’t pivot immediately to changes in demand. And supply problems caused by semiconductor shortages have taken on a new dimension through this shift in demand toward more fuel-efficient models for which automakers were unprepared.
Used vehicles: Ample supply.
Inventory at used vehicle dealers, at 2.46 million vehicles at the end of June, was up 5.5% from a year earlier. Compared to 2019, it was only 10%.
But sales have been lower for months compared to 2021 and 2019 as buyers have begun to resist higher prices. And the supply of days at the end of June, given the lower rate of sales, increased to 49 days, only slightly above the average in 2019 (48 days).
Used Cars: Crazy price hike ends without fuel.
Between December 2019 and December 2021, over those 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 completely bad, and that’s where resistance finally started to set in.
By June, the average asking price fell to $28,012, slightly below December. The falls in January, February and March are seasonally normal, but the falls in May and June are not. And from the looks of it, the completely insane price hike may have finally run out of fuel.
But there is still no oversupply. Entry into the used vehicle market from rental fleets has been dampened by new vehicle production shortages for rental fleets and they are slower to turn around their fleets. And wholesale prices, while falling from the rise through December, are still very high. In this environment, traders are not yet motivated to drop prices by a whole bunch in order to move the iron. But at least the price hike has run out of fuel.
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