Pent-up demand in time for the recession when supply might finally rise enough? This messed-up economy will continue to dish up surprises.
By Wolf Richter for WOLF STREET.
Automakers have now reported their June new vehicle sales, or their Q2 new vehicle sales, for the US, except Tesla, which doesn’t report US sales but only global sales. All automakers, even Toyota, and now even Tesla, are struggling with the ongoing semiconductor shortages, and they started the month of June with desperately low inventories on dealer lots and in transit.
And so new vehicle sales in June plunged by 13.5% from the already horribly beaten-down June 2021, to 1.127 million vehicles, and collapsed by 25% from June 2019, the last decent year in the industry, according to data released by the Bureau of Economic Analysis today:
Monthly v. quarterly sales, and what mess it is now.
All automakers used to report US sales (deliveries to end users) on a monthly basis, except Tesla, which doesn’t report US sales at all. Then GM decided in 2018 that it wasn’t going to do that anymore, and it switched to quarterly sales reports. Other automakers followed.
Ford switched from monthly to quarterly sales reporting in 2019. But then during the pandemic, Ford flip-flopped and switched back to monthly reporting, which now is making comparisons to the last decent year the industry had – 2019 – impossible because Ford only reported quarterly sales. But then there’s still 2018. So that’s where we’ll look for inspiration.
Today Ford bragged about its monthly sales for June that had jumped by 30.5% from June 2021. But wait…
In June 2019, Ford had reported only quarterly sales, and so we cannot compare Ford’s monthly sales in June 2022 to June 2019, the last decent June the industry had.
But June 2021 was when Ford ran out of inventory, and its sales collapsed to just 115,789 vehicles, down by 50% from June 2018 (230,635 vehicles).
And from that collapsed base in June 2021, Ford’s sales now jumped 30.5%, but they were still down by 34.0% from June 2018!!
So you see where this is going. In terms of quarterly sales, in Q2, Ford sold 483,688 vehicles. In Q2 2019, it had sold 650,336 vehicles. In other words, Ford’s Q2 sales plunged by 34% from the last decent Q2, in 2019. And Ford, among the hardest hit by the chip shortages, was among the worst decliners from the good times (2019).
These are huge sales declines, and they hit to a somewhat lesser or greater extent all legacy automakers.
Total new vehicle sales for the entire industry in Q2 plunged by 20.8% from the beaten-down levels in Q2 last year, to 3.29 million vehicles. While up a tad from Q1, sales were down 21.3% from Q2 2019. These quarterly sales figures in the 3.3 million range were first seen in the 1970s.
Not a demand issue, but a supply issue.
June started out with 1.13 million new vehicles in inventory on dealer lots and in transit, down by 70%, or by 2.68 million vehicles, from the same period in 2019, according to Cox Automotive, based on its Dealertrack data. In 2019, vehicle inventory averaged 3.66 million vehicles. So far this year, inventories averaged 1.10 million vehicles:
Under these conditions, customers end up having to order a vehicle and having to wait months for delivery. They’re still paying whatever prices, including over sticker. Automakers, with no inventory to promote, have cut their incentives from roughly 10% of MSRP in 2019 to just 2% of MSRP in June. And the average transaction price in June soared to a record of $45,844 on price increases, over-sticker prices, and automakers’ prioritization of high-end models to try to make up for the loss of volume.
These are signs of supply issues, not demand issues:
Pent-up demand in time for the recession when supply might finally rise enough?
In the period between February 2020 and June 2022, about 8 million fewer new vehicles were sold than in the period between February 2017 and June 2019. By the time production catches up with demand, there might be 10 million fewer new vehicles sold than in the equivalent pre-pandemic period.
These 10 million vehicles would amount to a huge shortfall. But it came because supply plunged due to shortages, and not because demand plunged, as during the Great Recession.
We don’t even know what demand really is; we just know it exceeds supply by a large enough amount to trigger these extraordinary pricing conditions, inventory shortages, and Americans’ sudden and large-scale willingness to order vehicles.
Vehicles don’t last forever – they last longer than they used to, but still not forever. And people are hanging on longer to what they already have, but they can’t hang on to their vehicles forever. Eventually they’re going to replace these vehicles.
So when supply finally increases – which may be just around the time that a recession might waltz into the economy – lots of people have been waiting in some cases years to buy a new vehicle. A recession means that some people lose their jobs, but most people just keep working and keep earning money, and now finally, there are some vehicles on the lot that they can buy.
The pent-up demand might not be all of the 10 million vehicles, but maybe only a part of it, and it won’t materialize all at once, but it will be there when supply arrives, even though the above-sticker prices might have to disappear, and dealers might have to slap on some discounts from MSRP, for these people to buy.
But that hidden demand is now sitting out there, and is growing every month, waiting for supply, waiting for the market to somehow normalize. I think this is one of many factors – similar to the labor shortages and other issues – why the next recession may not be much of a recession in the real economy, though financial markets will be struggling with much higher interest rates, QT, and inflation.
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By the time supply comes back to normal levels we may have interest rates at levels that may make financing a car a lot more expensive than when we were having 0% deals. This will help keep a cap on sales I think
We already have interest rates jumping higher.
Example, 2022 Toyota tundra, 5.49% finance or 7.49% lease.
This will go up another point or two by Q4.
The supply/demand equilibrium may be reached faster than anyone is thinking.
Look at housing, the supply is heading up in notches as buyers stay away for one reason or another.
In Phoenix, the APR for a Tundra is 3.9 for 72 months for a Tier 1 customer per the Toyota corporate website.
DM: Tesla is no longer the world’s largest electric vehicle maker as China’s Warren Buffet-backed BYD takes the top spot by outselling the Elon Musk’s company by 77,000 EVs in the first six months of this year
BYD, an auto giant backed by Warren Buffett’s Berkshire Hathaway, saw a 315 percent jump in sales from last year – it sold 640,000 electric vehicles, while Tesla delivered 564,000.
BYD is a huge company. Besides cars, they sell electric delivery trucks worldwide and in the U.S. They make their own batteries for their vehicles and also sell battery assemblies to other EV manufacturers. They also manufacture their own chips for their vehicles.
They sell electric buses in the US too, assembled in the US.
Anthony A. – Not quite true. BYD lumped all hybrid sales in with straight electric vehicles. Still not quite up with Tesla but impressive nonetheless. Good to finally see some real competition.
From the Chinese EV cars sold here in the UK, they also can be much less expensive than a Tesla. They still cost an arm and a leg but they are cheaper with a similar range of not a lot but if you live in a city, they are fine….we also have more chargers now than you do and hopefully that will expand…
It’s not backed by Berkshire,it’s a stock investment
A beautiful day.
“why the next recession may not be much of a recession in the real economy, though financial markets will be struggling with much higher interest rates, QT, and inflation.”
Great take on the future wolf.
All of the established car manufactures management really dropped the ball here. If one of them could have put cars into lots, there was a good amount of share to take.
For those skeptical, I can just point to the gaming consoles, which are dependent on chips too. M$ figured out a way to improve their chip supply first and have been taking some of Sony’s share to reach parity in 2022 (sony had legacy and first year numbers suggesting that they should be outselling Xbox).
That none of the auto cos figured out a way to get to the front of the line re chips is collective managerial incompetence. These are five figure products being held back by one or two figure chips. That or antitrust. But I would rather err on stupidity rather than malfeasance.
I’m so tired of these stupid-ass comparisons. Semiconductors are not potato ships. You cannot use the chips designed for a game console or a tablet or a crypto mining rig in a review mirror or in the sensor of a catalytic converter. They’re NOT the same chips!!! Got it???
Vehicles have thousands of specialized chips today. If they’re out of one of those specialized $4 el-cheapo trailing-edge chips, they cannot finish the vehicle, even if there is a huge glut of processors for crypto mining rigs. Got it???
Also, they don’t realize the factory which produces one type of chip cannot be changed immediately to start another like that. It takes time and also huge investment.
Yeap. The high end Intel fabs (3-7nanometer) are not going to be converted to running building power ICs which needed (250nm).
Some of the steps would be different and they would need new tools. Just doesn’t make sense to change if they “think” this supply chain issue is temporary.
Exactly!! When we don’t sell China the high-end chips, we ended up with not enough cheapo chips. Hmmm… I would go out and buy all the available supply of the cheapo stuffs too. Just a way to leverage.
Now we are stuck in this distrust of supply chain. No wonder why so many things are out of whack.
From what I have read few new trailing-edge chip plants are built in normal times. Plants that were leading-edge when new eventually become trailing-edge as the tech forefront moves on, and being older and amortized can produce at low cost to be competitive. During the pandemic orders collapsed so the plants were shut down and that capacity is gone. Even though demand has recovered it isn’t economical to build new plants for trailing-edge as they can’t compete with the older existing plants.
Yes, and I think Samsung (?, well one of the Koreans) has figured this out and is now building a new trailing-edge chip plant, but the prices are going to be a lot higher, which it can do as it is going to specifically make chips that are in short supply.
At some point, when there is enough money involved, this problem is going to get resolved.
I am still trying to pin down (in time) an apparent switch over from 5v to 3.3v in machinery control apps, especially in the microprocessor chips. I got to blogs where work arounds are discussed by what are obviously pros, but none in auto. I am still not certain if CAN bus protocol is still fixed at 5v or there is some 3.3v around, or that existing stuff works with only 3.3v on the bus. Which is just two wires with a clever way (from Bosch) of avoiding having to have a busmaster control the bus traffic. Modules can be added almost endlessly and eliminate a lot of wiring.
Anyway, lots of talk about matching or in some cases ignoring the voltage change.
I am pretty sure, however, it is happening for size and heat reasons….and as always, cost. Some reader must know more about this. Help!
Anyway, it can’t be helping the chip shortage, that’s for sure.
Sorry, should have said “microcontroller”, just performs a special action, like sensing and changing preferred seat temp.
I don’t know how people ever survived driving cars without it, including me. Someday I may be referred to as part of a new greatest generation for all I have suffered and so needlessly.
Nate’s point is legit: “That none of the auto cos figured out a way to get to the front of the line … is collective managerial incompetence.”
It’s a powerful indictment that 2 years into a supply shortage, none of the major manufacturers (or their regulators) has figured out how to get past the bottleneck and sell more cars.
The WW2 generation is rolling over in their graves. From 1942-1944, all kinds of stuff went from ideas to globally-distributed mass production. Where’d all that ingenuity and flexibility go?
So you spend three minutes on Google and suddenly you know something that the experts in this huge industry, after billions of dollars in efforts, are too dumb to figure out and resolve???
Maybe there is something to a well financed (by taxes) government financing and then demanding ingenuity and flexibility from all, when the entire nation’s back is to the wall?
Like with climate change bearing down, and fossil fuel becoming harder and riskier to get, anyway?
The BMW 330i xDrive Sedan is an inline 4 cylinder, 2 liter turbo AWD. It runs 50 grand. Five are in production or in transit at the Penske dealership in Bloomington, MN. Nothing on the lot & ready to go.
One would think that if Ford had anything remotely comparative for 40 grand, they would be moving out the door like hotcakes.
As I was looking over a 39 year-old college textbook for electronics, I came across a chapter on microprocessors.
“The most inexpensive microprocessor chips cost as little as $2 in quantity, and considerable computational power is available for $10.” from ‘The Art Of Electronics’ 1983 reprint (first out in 1980).
The chapter starts with a look at the Intel 8085. I bet Ford’s engineers wished they had access to these old things. “Rear-view mirror control” eh?
And just to make a point, the new Italian naked bike that replaces my 2019 version, has adjustable, on the fly, engine braking that’s computer controlled. You’re rolling down the highway at 70 mph and let off the throttle; do you want to coast or do you want to slow down? The Tuono (Italian for thunder) lets the rider set the bike up to their liking in every aspect you could imagine.
“Computers on wheels.” And, my bicycle’s Lithium-ion batteries for the derailleurs’ Bluetooth wireless shifting are all charged up and ready to go for tomorrow’s ride.
No computer chips, no cars. Sad, really.
I’m already there, so I have no where to go anyway.
Agree una,,, like totally dude ( or dudette as the case may be?? )
Folks need to understand that other than the ”exercise” component of going somewhere as DR illustrates so well,,, pretty much anywhere,,, there is absolutely no better, or worse, than here, though maybe different in interesting aspects, eh??
Admittedly took this old boy a long long time and many trips, including across USA many dozens of times driving and hitchhiking as well as walking/hitching across many miles of UK and EU, before this basic concept even began to sink in…
Still have the ”wanderlust” as it was formerly called,,, and might have to do something similar with another sail boat sooner or later, in spite of that similar result.
“Wherever you go, there you are.” kinda/sorta says it all…
Must of been where Voltaire and Hunter S. Thompson got their inspiration for Candide and Candy.
“One would think that if Ford had anything remotely comparative for 40 grand, they would be moving out the door like hotcakes.”
Yes, they’re sold before they arrive on the lot. There is nearly nothing on the lot. There are long waiting lists for all of Ford’s EVs, including the Mach E Mustang which will blow the doors off the BMW you cited (0-60 in 3.5 seconds). Get on the waiting list.
Like I said, it’s a SUPPLY problem, not a demand problem.
I think the demand side will fizzle fast. So many jobs are from massive Fed fake printed money. Dash, wework, zoom, now Facebook, so many more. Unprecedented fake money created all kinds of silly jobs that will not be holding up imho. When the housing ponzi blows shortly, the whole house of cards with it’s massive debt will show what a real job is and reveal true demand. The Fed would have to do massive QE again to save a complete implosion.
I know a couple of people who got laid off by startups. They had new jobs already lined up and just jumped ship, no problem. Labor shortage in tech – and nearly everywhere – is still there. The layoffs you’re seeing are minuscule in numbers.
States and municipal governments are swimming in money from the pandemic stimulus and huge massive tax revenues — and they’re now trying to spend it, and they will spend it. That stimulus money from 2020-2021 is still circulating everywhere.
Consumers’ incomes have risen, and they’re spending like crazy. San Francisco is crawling with tourists. They’re throwing money around left and right. Airports are packed, planes are packed, people don’t mind the high prices, they’re paying whatever. All this stuff about the consumer being “tapped out” is just nonsense.
I don’t think demand will fizzle until the Fed makes it worthwhile holding cash. I bought my daughter a bike 2 years ago, and could sell it now in used condition for what I paid. Meanwhile, the same cash I had in the bank is going backwards fast.
The Fed keeps saying it is serious about inflation but cash deposits are at around negative 10%. It is better to buy anything than hold cash. When asset prices were going up then fine – throw some into your favourite ponzi, but now they are tanking that is not an option. So what do you do? Believe that the Fed will actually get inflation under control by talking very seriously about it, or accept that they won’t and turn your cash into real goods that you can use, and are likely to be worth more than in the future?
Multiply this across lots of individuals and you have an inflation problem that is not going to get better by itself. Fed needs to get the real rate of interest at least down to -1%, but they are terrified of putting interest rates up to 9%. If they don’t do it soon, wage bargaining pressure will push through 5-10% rises this year, and prices will go up to 15% next year to cover this, and the madness begins.
That’s why when I hear that inflation may have peaked for all items, I just look at your maths and think…nope…
“The chapter starts with a look at the Intel 8085. ”
That’s a blast from the past. I worked with the 8085 from 1985 to 1989 at a fiber optics test equipment company called 3M Photodyne. The 8085 was a general purpose microprocessor used in all kinds of equipment. After that I moved on to another Intel microcontroller called the 8051. Believe or not, but new derivatives of the 8-bit 8051 are still being produced today.
Oh, and the 2006 Kawasaki KLR 650 that I ride, is unchanged from the original design in 1986. Not a single computer chip is used. A slow ugly dinosaur of a motorcycle… but I love it!
I love these no-nonsense diehard bikes. I am riding a 1992 Kawasaki Zephyr ZR1100, constructed on the philosophy of the legendary Z900, and there is not an LED display or chip in sight.
With proper maintenance these things will still be around in the year 2100, when all the current chip-stuffed rolling playstations will be long gone because the electronics that power them have failed and become impossible to replace.
New cars and motorbikes are becoming more and more like smartphones. End-of-life is built-in and once that is reached they can only be scrapped. How this terrible waste continues to be tolerated by the “save our planet” crowd remains a mystery to me.
Like the Kwaka 900 2 stroke triple. Average owner life expectancy 6 months, apparently. Not a chip. but the triple carbs needed a bit of tuning.
2001 Harley Sportster here -21 years on the road 32,000 miles 58 mpg on highway
(not bad for an 883 cu inch, huh?)
Utterly dependable Batteries last 8 years
And quicker than most cars 0-60 , with only stage 1 mods (Vance and Hines, bigger carb jet, high flow air cleaner). And USA built.
I rode a 500 3, owner lifetime was probably a little bit longer. Massive torque instantly. Heard they were banned quickly from the AMA series. (TT, mile, etc)..was just too easy to beat the four strokes.
The distributor in Austin where I worked had Intel, second sourced by NEC. We gave away the Intel 8088 processor with the 8-bit bus to design engineers so they would design in and place orders for the peripheral chips, where the margins were better.
Blasts from past,
In 71 I was making punch card decks for thin film optical interference filter designs on an IBM 360. Filled a room. The “computer lady” loaded my app on tape, flipped a lot of switches, then I ran the deck thru, and the theoretical bandpass or whatever was drawn by an X-Y machine in ink. Later in 90 or so I had a class where we programmed an 8086 in hex to add and subtract different numbers. I remember in the mid 70’s when the first op-amps and then 555 timers came out…engineers went nuts. I also built and biased a JK flip-flop around 85 using transistors/resisters/caps and o-scope in another class. I breadboarded for years afterward for fun, using my trusty Digi-Key catalogue….the good old days before point and click. I know what’s going on in there, but coding and memorizing menus are just boring.
Total modern Luddite.
Your career path sounds very similar to mine, but I’m about 15 years behind you. I remember when my dad got our family’s first calculator it was 1973 and I was 10 years old. My dad was showing me how to use it. When he would make a mistake, he would hit the [CLEAR] button about 5 times while saying “clear memory clear memory”. Well to this day when I hit a clear button on anything, I hear my dad saying “Clear memory clear memory”. Lol!!
Yeah Harvey, only I don’t call mine a “career”, just a long series of “jobs”. Anyway, check this out, a Luddite “win”? (From Wikipedia)
The 555 timer IC is an integrated circuit (chip) used in a variety of timer, delay, pulse generation, and oscillator applications. Derivatives provide two (556) or four (558) timing circuits in one package. The design was first marketed in 1972 by Signetics. Since then, numerous companies have made the original bipolar timers, as well as similar low-power CMOS timers. In 2017, it was said that over a billion 555 timers are produced annually by some estimates, and that the design was “probably the most popular integrated circuit ever made”.
How sad that anyone could possibly think that electric bluetooth brakes are better than a cable or hydraulic brakes. it is only a bike, for crying out loud. Don’t be so pretentious.
First of all, Dan’s comment explicitly referred to his bike’s DERAILLERS being controlled by Bluetooth. Your cars transmission is also most likely controlled electronically.
Secondly, computer chips have been an integral part of vehicular breaking systems (anti-lock breaks) for the last 50 years. Your car is not nearly as safe without them.
I’ll stick with my Campy Record Carbon groupo and my hand painted steel Colnago Master Light art frame. A properly tuned / maintained cable actuated system of similar quality is just as accurate as an electronic system. The electronics are often purchased by “Freds” seeking an edge and “lookatme” points.
It’s similar to the folks that buy a 2022 Porsche 911 and think they’re a race car driver because the electronic nanny items are principally responsible for keeping their taillights pointing in the right direction. Put them in a 80’s or 90’s vintage 911 and they’ll be wrapped around a guardrail in short order.
My 85,86,87 (frame,body,engine) Toyota 22R-E off road “ranch rocket” project 2013…never finished, along with container house, but everyone had one up there. Also had a home built thingy and a Samurai RRs when I was there almost full and then full-time 98-02-late 06) had a lever hooked to braking valves and rod to rear axle. When the bed went up, the breaking was shifted more to the front….presto!….chipless ABS.
Trailing throttle oversteer is never fun. Keep your foot on the gas, and turn the steering wheel more.
Yes, your bicycle is sweet!
I have designed and raced two steel fixed-gear track bikes decades ago, and I still ride them on the street once in a while.
But nothing yet surpasses my 2020 Bianchi Oltre XR4 with a SRAM Red 12 groupset. I have a mid-nineties Schwinn Paramount, made in the USA, steel frame machine with Shimano, and a 2010 Wilier Cento 1 with a Campy Super 11 groupset as my backup road bikes.
The Bluetooth shifting is better. You come to an incline, and do a double-tap to the right, then a duel left & right tap, and in an instant, the chain is down two in the back and into the little ring in the front. Yes, it can be done well with my Campy Super Record set up, but it is so easy, fast and precise with the SRAM.
And when I descended, going northbound from the top of the river bluff, at well over 50 mph this morning on the Bianchi, to stop at the intersection of Hwy 13 on the south side of the Mississippi, its hydraulic disc brakes are simply the best.
But, “it is only a bike.”
That’s true Ford has nothing comparable to that BMW. Lincoln, which would be the comparable brand, only sells SUVs now.
From, “Times they are a changin'” to, “I used to care but, things have changed.”
I work with auto dealers and so far so good — business as usual. I suppose they are making due with lower volume but higher prices.
A quick check of security cameras on storage lots show a little higher inventory versus 2021, but still looking like about 80% empty.
I wish I bought a minivan before the pandemic.
There are actually a couple of reasons why the average age of cars on the road goes up. Reason one could be that they are built better and last longer but it could also be that the supply of new cars is so pitiful and expensive people have to keep driving their old cars no matter what. As evidence of the second theory is the old East German Trabant , which stayed on the road for an average of 28 years. Where these communist wonder cars really twice as well built as the average Toyota, or was it the 9 years that the average East German had to wait to qualify To buy one? Are our cars better, or are we just becoming more like the old East Germany?
2013 Altima 3.5 S
3 wheel bearings
Tires and brakes
14.0 quarter mile
32 overall mpg
Try to imagine a 1970s or 1980s car doing that. Cars now are way, way better.
A 3.5 sounds like a V6 engine that would cruise on the highway at 2,200 RPM. A similar car from today will have a 4 cylinder with constant turbo boost fed into the intake in order to maintain cruising speed, and will not be as reliable as a V6.
tractor trailer engines….
They’re not 4-cycl but still… Are you implying that a forced induction engine is de-facto less reliable? It is more complicated, yes, but that does not necessarily mean less reliable. Diesel forced induction engines have been around forever and many of them run nearly forever. Plenty of 1995 Ford 3.6L V6 needed new head gaskets at 60k. Let’s not even talk about naturally aspirated engines from decades before that.
2003 Nissan Frontier Pickup
5 speed manual trans
1 water pump
1 set of new front brake rotors
Still on the original clutch
East German wit.
My trabant will be delivered in nine years time? Morning or afternoon? because the plumber is coming in the morning.
We are becoming more like a third-world country, if not East Germany. I suspect that due to the banksters’ “Federal” Reserve’s creation of inflation for years to decrease the banksters’ liabilities, most Americans have lost so much purchasing power that, except for the more wealthy baby boomers and their heirs, fewer and fewer of the more expensive cars will be purchased each year. Like other countries, Americans will probably move to lower level, smaller cars, except maybe for very cheaply produced, domestically produced trucks.
More and more Americans will become poorer and poorer due to the effective corruption tax. Aside from China, which leads us by a mile, we are one of the most corrupt countries in history with the greatest wealth inequality due to the corrupt efforts (“financial innovation” of new cons/scams) of the parasitic banksters and financiers.
Smells like it’s the 90’s Soviet Union in the US today.
It is actually far later than that. The corrupt US Crony Capitalists have already bought everything that their corrupt Crony Politicians and them are going to be going to make money off.
And yet they are continuously voted in year after year.
I recently read an article about China buying up farmland in North Dakota. A few stories down was an article about Bill Gates buying many times more acres in the same area.
We are definitely living in a globalistic, winner-take-all, no-holds barred environment.
What is the common denominator……. socialism.. government intervention in the economy.. political leaders who are both arrogant and incompetent.
Socialism, are you sure it is not fascism we see?
The cororate state, now even more a private corporation enteprize. Politicans and government is just a facade.
You must have socialism before you can have fascism.
What “socialism” Where is it in the USA?
The programs that some called “Socialism” that were proposed, e.g., a larger, child tax credit and free university educations, have all been defeated: thank Manchin and Sinema. If you are talking about Social Security, your payments under Social Security should be adjusted for inflation through the CPI but are not sufficiently adjusted. Since the CPI measurement has been monkeyed with for decades now, your Social Security payments in future years will be enough just to buy yourself some store coffees, if that.
Medicare is also very underfunded since the banksters’ growing inflation is also eating the spending power of its budget, while revenues have not been increased from taxes on the vast income of the ultrarich trillionaires, who rarely pay taxes at even a fraction of the rate that most Americans pay.
Like China, the US is heading for a demographic cliff in years, because it has placed most Americans in high, financial stress, so they quit having children with only a minor, 2021 increase from a disastrous decrease for years. As a parent, I can tell you a cesarean section can put you in tens to hundreds of thousands of dollars in debt.
What has been said about China due to the one-child policy, which had resulted in its labor costs spiking even in that benighted country, because fewer young people are available for factories, will be said about the USA in some years due to the selfishness of the ultrarich in the US in sucking out most, ordinary Americans’ meager incomes. See Macrotrends on US birth rate. See “US fertility rate is below level needed to replace population, study says” in cnnhealth. See “US birth rates rose slightly in 2021 after a steep drop in the first year of the pandemic, CDC data shows” in CNN.
Like the Russian and CCP kleptocracies, the US, bankster’s kleptocracy reached and surpassed the maximum, sustainable level of stealing from Americans years ago.
With the chip shortage producers have at least an excuse for bad sales numbers. Hard to analyze this.
F : down from 37 to 1.01 in Nov 2008, 50% retracement in Jan 2011,
down to 4 in Mar 2020 ==> up to 34 area.
There were 800,000 horses in NYC after the civil war.
There will be 800,000 EV horses in mid 2020’s,
What will the next recession look like? High inflation is there to stay, I guess. And we have these supply issues. But that should introduce growth? But then every financial asset is looking like unravelling? What will happen?
If you want 30 way power massaging seats, the local Lincoln dealership has a Navigator in every color and wheel style. This push for higher priced/margin vehicles obviously increases chips per vehicle.
Anecdotal: Driving across the South the past month, two trips, there were many car carrier trucks loaded with Kia/Hyundai vehicles, very few Mercedes, Toyota, Nissan and Hondas to be seen, though they also have plants in the region.
Dealerships are suddenly desperate for something to do. My truck had 3 open safety-related recalls, so they sent a mobile tech team to my house do them for no charge. The worm has turned.
Arrowhead BMW sent out a mobile tech to replace the passenger airbag on my E46 M3 because I was too lazy to drive to the dealership and the nearest dealership is a Penske store where I couldn’t stomach to go, even if only to use the bathroom.
No charge. The tech offered to buy the old girl. Not for sale. Last of the “real” BMW’s.
Kia is South Korea company,l believe
Kia/Hyundai is definitely South Korea.
I had a 2013 Santa Fe that was manufactured in Georgia and loved it. Passed it on to my daughter and she totaled it in less than a month.
Not too sure about Kia flea, but Hyundai made a HUGE commitment when they invested in a very huge manufacturing facility near the capital city of Alabama several years ago.
Many jobs were created by the construction,,, and even more, mostly ”long term” for the manufacturing…
Never heard any negatives from neighbors in our former ”flyover” redoubt, except they had to ”commute” for the good and very good jobs as those facilities.
For us, the family us, meant some more traffic locally in Montgomery that we had to go through on our trips to our locality…
I applaud the ”foreign” companies who have figured out how good the USA ”workers” are,,, as opposed to the USA ”manupilators” were, are, and apparently are able to continue with their ”paper”…
Seriously folks, if WE, the PEONs WE, continue to allow these and SO many other ”paper dragons” to continue to drag our ”real” economy down and down without any real benefit for the folks that made/make ”real stuff”
WE the PEONS deserve what we get
The Hyundai plant outside of Montgomery also produces Kias, as the Kia plant in Westpoint produces Hyundais.
I-65/85 between them is dotted with auto parts manufacturers.
Auburn/Opelika area is booming partially due to the auto industry.
Lots of great Korean restaurants also
We ordered a Platinum F150 in September 2021, and a Limited F250 in December 2021, and neither has been built. A 2022 Tundra has already replaced the ordered 150, but the dealer will give us first dibs on it if we want to replace an F250 with it.
Wolf, what has the rise in interest rates done to dealership floorplan interest rates, if anything?
If dealers are not sitting on inventory, floorplan interest is not really an issue. It’s a big issue when inventory piles up. But now most dealers have the opposite problem: not enough inventory.
Most franchised dealers have “floor plan assistance” included on the invoice from the manufacturer. It’s part of the hidden profit not disclosed on the invoice shown to the customer. The amounts are based on the MSRP. At this present time, it’s probably a profit center.
In addition, some of the well capitalized dealerships do not maintain but a minimum amount of flooring on their new car inventory… just enough to maintain the comprehensive insurance coverage.
People may drive less with higher fuel costs, higher vehicle costs, parts and labor shortages. There is Uber, Amazon, Fedex, UPS, Instacart grocery delivery, and a pharmacy delivery service. One may shop from home. Auto insurance costs are not rising as fast due to new safety systems like automatic braking, backup cameras, adaptive cruise control, lane centering and blind spot sensors/alerts.
My brother told me he has four cars, none of them new. Both his children are old enough to drive. One of his cars was broken a month and not fixed. They were waiting for a part.
My husband bought gas today for $3.77/gal. Seems like a bargain after some of the prices we’ve had. I too had to wait for a part. It was under warranty, but on backorder. Honda labeled it as critical and I was fortunate to get the part in a week.
IMO sales declines have much less to do with declining inventory, and everything to do with increases in prices and interest rates giving shoppers payment shock.
While inventories are lower, there are still cars on the lot if you have to have one. It may not be the color or optioned exactly the way you want it, but I guarantee you the Make and Model you want is available.
What is killing sales is the fact that the “average” payment price on a new car is now over $650 mo. That is not the payment on high end, it is the average. Half of sales have higher payments.
People usually by cars more on want than need. The average car today will last 300K or more with regular maintenance. I have seen many go over 500K. What drives new car sales is about 80% ego, and 20% actual need. For some reason people still believe other people judge them by what they drive, when in fact no one really cares.
Total nonsense. Where does this crap come from? What idiot bloggers are pushing this crap?
Lots of dealers have nearly nothing in their new vehicle inventory. If you want a new pickup of a certain model and configuration (i.e. F-250 Crew Cab), but they have nothing close enough in stock, well, then you order one and wait for months. And that’s what is happening. The majority of the vehicles that are coming off the car carrier at dealerships are already spoken for.
Not what I am seeing in my area. Lots are fairly stocked, and not a whole lot of interest from buyers. Purchased a car for my wife a few weeks ago, and I was the only one in the showroom.
Inventories may be lower than normal, but it is the economy that is killing sales.
For the example you gave, there are 45 new in stock within a hundred miles of my home. Perhaps you can come up with an example of something that is not available for me to check….
OK, I checked a Ford-Lincoln dealer in your town in North Dakota, and they listed some “in-stock” inventory, lots of “in-transit” inventory, and some “sold” inventory. It listed two F-250 crew cabs in inventory. One of them was “sold.” The other was “in stock.”
The in-stock unit came with an “internet price” of $116,000 but with an MSRP of $91,000 — that’s $25,000 over sticker. That’s why it’s still in stock. Duh. This is not a demand problem but a greed problem.
In terms of the economy, I would not generalize from your town in North Dakota to the rest of the country.
Not sure where you got the idea that I am in N Dakota, but I am not even close to there.
If you don’t want me to guess, you can just tell me.
I guess you cannot trust your IP address system…
Point is that even $90 grand sends a huge segment of the population walking off the lot shaking their heads and wondering what the hell happened in the 15-20 years since they bought their last pick up for $20K.
Overpricing impacts demand, which in turn impacts sales.
Not true Jpup,,,
But may truly be ”local” once again.
Had a neighbor who was a ”dealer” for one of the former ”big three” several decades ago and was very clear about this concept.
Price, yes,,, availability currently, also yes,,, but, and it’s a large butt,,, is the current challenges well communicated by our Wolfster..
’nuff said for now,,, but is going to be seriously entertaining for a long time, as the Wolf says…
My only suggestion is, ”keep you powder dry and ready.”
Exactly what that I said is not true?
Does it have to be an example you can’t check?
If later years policies realy have pulled forward demand, there is no pent up demand. The demand may have been pulled forward, still it is not sure more demand will follow.
If energy get expensive, we may see changes to adapt. Lower consumption is one adaption to expensive energy.
That’s why local government has installed bicycle lanes on major downtown streets ,this is your future,get in shape
It’s unfortunate that auto makers keep changing their reporting frequency, making comparisons difficult (or in case of Tesla’s domestic sales, nearly impossible).
Here is a ‘hedged index’ that I would like to follow, if and when the data become available:
Sales of Ford F-150 Lightning / all Ford F-150 sales (gas and electric)
By comparing (roughly) like to like, within a single brand and model, the time series can give a sense of the rate of EV adoption.
Currently, supply shortages could make this metric misleading. But over time, a pattern will emerge — most likely, a ceiling on the percentage of electric F-150s sold.
The reporting frequency “used” to be in 10-day increments. Then reported sales went to 30 days when market share was king. Then they went to quarterly (by some manufacturers) to stop the wild swings in their stock values based on swings in YOY and MTM data – which could be explained away by the number of reporting days / holiday weekends falling differently, number of weekends in the month and the like.
The data is still exchanged among manufacturers but often “unofficially” due to the risk of violating anti-trust laws. Our attorneys were paranoid about our regions comparing sales with competitors. Companies like Urban Science tried to fill the gap by offering “unofficial” data based on RDR (retail delivery records) transmitted by participating manufacturers, but it’s not released for public consumption.
When I was in the business, we called a number and got the sales figures (so many cars, so many trucks, so many total) by a voice recording for all Ford dealers in our district. We knew how many new vehicles each one of them sold. We knew who was number 1. I think GM had a similar system, and we might have called it from time to time to see how their dealers had done.
In terms of the nationwide SAAR sales data, everyone now cites the BEA data, and I think the BEA gets the sales from the automakers.
Geez, shortages and EV vs ICE. What to do?
I’ll just keep my 4Runner for another 100K and see what happens.
Using a Toyota 4Runner as an example, a particular trim model that used to be $42k is now $52k – a $10k increase in msrp in 2 years. I do not see this as sustainable unless they plan on selling a lot fewer cars moving forward. When you factor in the massive inflation everywhere else, there’s no way people can service this additional debt.
And now interest rates are ratcheting up. Most of the people buying these vehicles have to use loans, so they are very sensitive to these rates. Somewhere I read that the average auto loan payment is now over $700. Are you freaking kidding me? Houses 10X household income, vehicles pushing 1.5X household income? Can’t see this ending well.
Nothing I would ever want and less is all I see looking at vehicles now. Wage slaves buying $45k transportation appliances. I don’t know what to do when the time comes. Spend it on a 1969 Dodge Dart? Or try to buy one of the dozen new base Corolla stick shifts available nationwide?
Curious that Biden tells refiners and gas stations to lower their price….
BUT, doesnt tell the Electric Vehicle makers to lower their price.
I was going to buy a new vehicle a few years ago, well before the pandemic, but prices were not that great at that time. Discounts had been reduced, and I couldn’t understand what was driving prices. That’s when I learned about Santander and their “fog a mirror” subprime loans where everybody qualifies. Financiers have destroyed pricing to the benefit of the wealthy, through the usury of the dumbed down debt junkies, at the expense of society and the prudent.
Buying a car is one of the worst experiences one can ever have. My experience with our local Ford dealership takes the cake.
The dealership literally increased the online price while we sat in their office negotiating the price! Who does that!? Our very kind salesman’s office was in a small windowless room with the only printer in the entire building. The finance guy came in at least five times to make copies. I told the manager they were treating their poor salesman like Norm from Cheers:-)
You never know what kind of deal you can really get until you make the salesman chase you out into the parking lot as you are leaving.
You have to consider it a sport, and if you do not have the entire sales force pissed off before you leave you have not done it right.
Same experiences for me ,most people to dumb to realize there in control,not some dumb as sales manager
Alert: Contrarian perspective:
What if… inflation trends down, from this point on. What evidence is there for this? Copper – SCCO (one of the best of class miners, and FCX, also high quality, are down 40% and 49% respectively. Precious metals are in a decline, too.
What if… the consensus, which is all waiting, expecting a recession and a mini-collapse if not worse, are wrong (which is common).
What if… there’s a face-saving measure by Russia to walk-back or at least diminish its aggression in Ukraine
What if… oil demand diminishes, which is rumored to be the case right now, and fuel prices decline.
And, what if… the FED actually softens its rate-raising or QT
No prediction, just offering a contrarian view and not one I’m actually betting on, yet.
Sorry about the avalanche of ellipsis marks.
Who cares if you are straight or gay? Can’t we just love everybody and judge them by the car they drive?
Anecdotal: I just sold my ’21 Infiniti QX50 for $11K more than the lease residual…and now I can’t decide what to buy. We can run on one car for a while, but waiting might mean higher interest rates or lease interest. I can’t decide whether to go up one level, down one level, or down two levels and just drive a relative beater for a couple of years until things settle down. You do get used to niceties, even though they usually mean more chips.
That’s nuthin’. A friend of mine recently bought his end of term 2020 Range Rover for it’s residual of $80K-ish, paid CA sales tax, and sold it to the next bag holder for $120K+ on Facebook Marketplace within 2 hours of posting it. He netted $36K. He’s driving his MY2003 BMW Sixer until the market changes.
LTVs are approaching 130%!!!