Still the strangest auto market ever.
By Wolf Richter for WOLF STREET.
The stock shortage at dealerships for new vehicles continues unabated and stocks remain desperately low, but the shortages are changing as demand has changed and supply is now piling up, for example at Ram dealerships, while vehicles Fuel-efficient are essentially out of stock, and electric vehicle models have long waiting lists, as people are tired of being hammered by high fuel prices.
The number of new vehicles in “availability” on dealership lots and “in transit” at dealerships fell to 1.12 million vehicles at the end of June, down 70%, or 2.61 million vehicles , compared to the same period of 2019, according to Cox Automotive estimates, based on Dealertrack data. On this basis, stocks of new vehicles have not improved since December. By comparison, in 2019, new vehicle inventory averaged 3.66 million vehicles.
The term “inventory” represents what is “in stock” and what is “in transit”. And it can include units that have been pre-sold. A dealer’s website typically displays three labels next to the vehicles in their inventory: “in stock”, “in transit” and “sold”.
The relentless rise in the prices of new vehicles.
The average asking price (list price) shows that retailers still don’t want to offer offers. The June average listing price increased 11.5% from a year ago, hitting a record $ 45,976, according to Cox Automotive.
Cox also said that during the last week of June, asking prices “started to drop slightly”. So maybe maybe maybe, retailers are just encountering some price resistance in some corners of the market.
Asking prices dropped in January, February and March, only to make a U-turn in April – and part of that has been seasonal as January and February are the worst months for retailers, when volume tends to plummet from. December binge. In June, they hit a new record, up 11.5% yoy. This still speaks of a hot and under-supplied market:
The average price of the transaction – the price at which the vehicles were sold and delivered – jumped 14% year-over-year, to a record $ 45,844 in June, according to data from JD Power. Compared to June 2019, this is up 36% or over $ 10,000.
At these prices, dealers made record gross profits per vehicle delivered. Including financial and insurance (F&I) sales, dealers averaged $ 5,123 in gross profit per vehicle, up $ 1,174 from already high levels in June 2021, 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, where ATP peaked in December but dropped from there to June each year. But in June 2020, the June ATP was at the same level as in 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 Decembers:
Shortage of fuel-efficient vehicles. There is no shortage of Dodge & Ram dealers.
Plenty of Supply at Dodge and Ram Dealers: Included in stock and in transit, Dodge dealers ended June with 90 days of supply and Ram dealers with 81 days of supply. The industry considers about 60 days to be ideal between tight and sufficient.
Essentially exhausted fuel-efficient vehicles. At the low end of the offering in the non-luxury segments were the Asian brands with fuel-efficient models that were substantially out of stock: Toyota Corolla, Kia Telluride, Toyota Camry, Hyundai Palisade and Kia Sportage.
At the low end of the offer by segment:
- Hybrids, 17 days supply
- Mid-sized cars, 22 days supply
- Compact cars: 24 days supply.
The offering of full-size pickups is growing: At the top 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: wrong inventory. In 2020 and 2021, pickup trucks were particularly hard to find and everyone wanted them. But then gasoline prices went up and suddenly the cost of refueling became one of the purchase considerations and the pickup trucks lost their edge. Demand has shifted to more fuel-efficient vehicles.
But due to long and complex supply chains, automakers cannot change instantly with changes in demand. And supply problems, triggered by the shortage of semiconductors, took on a new dimension through this shift in demand towards more fuel-efficient models that automakers weren’t prepared for.
Used Vehicles: Wide availability.
Inventory at used vehicle dealerships, equal to 2.46 million vehicles at the end of June, increased by 5.5% compared to a year ago. Compared to 2019, it fell by only 10%.
But sales have been down for months, compared to 2021 and 2019, as buyers have begun to resist the skyrocketing prices. And the supply of days at the end of June, given the lower sell rate, rose to 49 days, just above the 2019 average (48 days).
Used vehicles: the crazy price increase runs out of fuel.
Between December 2019 and December 2021, in 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 absolutely insane, and this is where the resistance finally began to take hold.
In June, the average asking price dropped to $ 28,012, just below December. Declines in January, February, and March are seasonally normal, but declines in May and June are not. And as it turns out, the completely insane price spike may have finally run out of fuel.
But there is still no oversupply. The influx into the used vehicle market from rental fleets has been mitigated by production shortages of new vehicles for rental fleets and they are slower in delivering their fleets. And wholesale prices, although they have dropped from their peak until December, are still skyrocketing. In this environment, retailers are still not motivated to cut prices for an entire group to move iron. But at least the spike in prices has run out of fuel.
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