While new-vehicle inventories have been on the rise this year, we’re still below the average supply levels witnessed prior to 2020. But we’re getting closer.
A recent report from Automotive News, stated that the vehicle inventory for the United States is somewhere around 2.89 million. This is based on an earlier estimate from Cox Automotive, which pegged average inventories at roughly 2.86 million in 2023 — up from 2.5 million in 2022.
While this leaves The U.S. with a 74-day supply on average, not all manufacturers are hitting that number. Stellantis brands were all said to have at least 119 days worth of supply and Jaguar was said to be sitting on over 150 days worth of vehicles.
Everyone appears to be getting rather excited about the prospect of automotive prices falling. The assumption is that great deals will soon be plentiful. But the historic marker for this happening has always been bloated vehicle supplies and we just aren’t there yet.
Part of this is due to complications incurred during the pandemic. Supply chains took a staggeringly long amount of time to normalize after everything was effectively paused in 2020. But the entire industry has also gradually pivoted to just-in-time manufacturing protocols after seeing Toyota enjoy decades of solid success. While the tactic certainly has advantages, it’s highly reliant upon a strong supply chain and ultimately reduces the number of vehicles one would typically have on hand.
Automakers also appear to be continuing to push higher-priced vehicles with larger margins, rather than trying to meet demand for their more-affordable models. Though this may simply be the result of consumers finding themselves unable to afford the former and manufacturers falling behind with no competition capable of taking up the slack.
From Automotive News:
There were fewer vehicles available priced under $40,000, with about a two-month supply, than above that level, where supplies ranged from 74 to 94 days.
Among the seven automakers reporting monthly sales and inventory, only Volvo Car USA saw its days’ supply increase in May from the previous month, according to the Automotive News Research & Data Center, with Ford Motor Co. the only automaker to end the month with more than a two-month supply. Toyota Motor North America was the only automaker among the seven to report less than a one-month supply.
The seven automakers collectively had a 30-day supply of cars and a 45-day supply of light trucks, both declines from the previous month, according to the data center.
Cox has likewise been exploring how dealerships are coping with the situation. Anecdotally, your author has been seeing a lot of lots looking extra full as we go into the summer months. But the reality appears to be that inventories are just now catching up to the levels we would have called normal just a few years ago.
Regardless, dealer surveys have indicated that the majority see the market as quite weak right now. Pricing remains rather high, inventories are rising, and consumers seem to be turning away from more expensive automobiles. Customer surveys have likewise shown that shoppers are largely opposed to the tech found inside modern cars and expressing concerns that production quality has declined in recent years.
In the immediate future, dealers say they are dismayed by a weaker-than-normal tax refund season, high interest rates, and potential fallout from the 2024 election.
Joe Biden has vowed to stay the course with electrification and do whatever is required to swiftly pivot the United States toward EVs. Meanwhile, Donald Trump has mocked the global shift toward electric vehicles and said he would deregulate the automotive industry so that manufacturers could provide a wider variety of automobiles, including traditional gasoline vehicles.
There is a lot of uncertainty in this market, leaving consumers and dealers alike unsure of the road ahead,” stated Cox Automotive Chief Economist Jonathan Smoke. “On top of uncertainty about interest rates, we are heading into an election season, and this one is especially breeding more concern. In the auto business, uncertainty is the enemy — it negatively impacts sales, hurts consumer sentiment, and leaves auto dealers feeling troubled.”
But it’s not all bad news, at least where the industry is concerned. While consumers may be fretting over historically-lean inventories and what new regulations may or may not be around the corner, manufacturers are still coming down from the profit bonanza enjoyed after inventories shrank. Cox believes today’s weakening demand will be short lived and that most brands can probably endure a little hardship.
“Overall, dealer sentiment is likely worse than actual market conditions,” noted Smoke. “While profits are down from all-time highs, we still believe the dealer business is healthy. Retail vehicle sales have been fairly consistent so far this year, inventory has returned to reasonable levels, and we believe interest rates have likely hit a ceiling. With a good job market, the market is not collapsing, and we believe weak current market sentiment is more about uncertainty than actual performance.”
Your author remains a little more skeptical and assumes present trends will continue until the industry starts offering more competitively priced vehicles and the economy improves. But we’ll see how things shake out in the coming months.
[Image: Mikbiz/Shutterstock.com]
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