Average prices jump relentlessly from record to record.
By Wolf Richter for WOLF STREET.
Inventories of new vehicles on dealer lots and in transit at the end of July dipped from a month earlier and remain stuck at the same woefully low levels where they’ve been all year that constrain sales, frustrate dealers, and turn off customers. This scarcity continues to push up prices to new highs.
But the mix of those inventories is changing with red-hot demand for fuel efficient vehicles depleting inventories of minivans, sub-compact cars, compact cars, and midsize cars to nothing-on-the-lot levels, while inventories of full-size pickups and SUVs are building, and some brands have reached very high levels, at the top of which are Ram 1500 trucks with a worrisome 88 days’ supply.
By the end of July, there were only 1.09 million new vehicles in inventory on dealer lots or in transit, the lowest since February, and in the same desperately low range all year, according to data from Cox Automotive. This was down by 70% from July 2019! With some vehicle segments essentially sold out, and with inventories building in other segments.
Days’ supply at the end of July declined to 37 days, from 38 days in June, same as in January. By comparison, in 2019, supply averaged 89 days.
Essentially out of stock: Small fuel-efficient vehicles. 20 days’ supply, which includes inventory on the lot and in transit, means that many dealers are essentially out of vehicles when you show up to buy. Here are the top-selling segments with about 20 days’ supply, according to Cox Automotive data:
- Minivans: 20 days
- Mid-size cars (Camry, Accord, Malibu, etc.): 20 days
- Subcompact cars (Accent, Spark, Versa, etc.): 20 days
- Compact car (Civic, Elantra, Corolla, etc.): 24 days
Suddenly plenty of supply: Large vehicles. 50 days’ supply and up. So overall, there is plenty of supply. When supply gets to 70 days or 80 days, there’s too much supply. There’s 88 days’ supply of Ram 1500 pickups.
Some of these segments (pickups especially) were super-hot during the pandemic while fuel prices were low. But this year, fuel prices hit the pain-threshold, and vehicle-purchase preferences adjusted. The top-selling segments with 50 days’ supply or more:
- Full-size SUV (Expedition, Yukon, Wagoneer, etc.): 50 days
- Full-size pickups (Ram 1500 = 88 days, F-150 much tighter): 51 days
- Full-size car (Avalon, Stinger, Chrysler 300, etc.): 61 days
Time for that $10,000-off-MSRP ad for the Ram 1500? Instead of these obnoxious MSRP-plus-addendum prices? Oops, already happening. Results may vary, but I just checked at one of my local Ram dealers, and they had five Ram 1500 Quad Cabs and Crew Cabs in stock, model year 2022, and after various factory and dealer discounts and rebates, the advertised price was $3,000 to $9,000 below MSRP. That part is back to normal.
Sales handicapped by shortages of what’s in demand. Supply is a function of inventories and sales. By the end of July, inventories were very low overall, but there were essentially no inventories of fuel-efficient cars that are suddenly in high demand, while inventories of pickup trucks and full-size SUVs are building, as demand has weakened.
So overall inventories were very low, and sales were horribly low, handicapped by this weird mix of inventory shortages and wrong inventories.
Shortages of specific microcontrollers and semiconductors that the auto industry uses for mundane things on a vehicle continue to dog production and trigger plan shutdowns and production cuts.
The industry has attempted to keep plants running by building vehicles with some components missing and putting them on storage lots until the missing component arrives. For example, at the end of June, GM had 95,000 unfinished vehicles on storage lots. That would represent 8% of total sales in July that didn’t happen because the vehicles, though built, weren’t finished and couldn’t be sold.
There is starting to be a glut of chips that are used in crypto mining rigs, PCs, and smartphones – but they’re not the specialized chips and microcontrollers that automakers are using.
Only 1.128 million vehicles were sold in July, according to data from the Bureau of Economic Analysis. Compared to July last year, when inventories were already a problem, sales were down by 12%. Compared to July 2019, when there was plenty of inventory, sales were down by 19%.
These are sales levels first seen in the 1970s – horrible sales in a horribly mature industry dogged by inventory shortages:
Average prices keep jumping from record to record. The average transaction price jumped by 12% year-over-year to a record $48,182 in July. The average listing price jumped by 11% year-over-year to a record $46,400, according to Cox Automotive data.
In dollar terms, over the past 12 months, the average listing price jumped by $4,600; and over the past 24 months, it jumped by $8,159. These kinds of price increases, on top of already very high prices, are crazy when you think about it. And eventually, people are going to think about it, but not yet apparently.
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