But prices are still way too high, and automakers are not cutting them nearly enough.
By Wolf Richter for WOLF STREET.
Total new-vehicle sales in November – retail and fleet deliveries by dealers and automakers to end-users – jumped by 10% year-over-year to 1.40 million vehicles, with one extra selling day this November, according to the data from the Bureau of Economic Analysis today.
New-vehicle retail sales – excluding sales to fleets, such as rental fleets – also jumped by 10% year-over-year to 1.15 million units, according to J.D. Power estimates.
The seasonally adjusted annual rate of sales for retail and fleet units, which accounts for seasonal variations and the extra selling day in November, rose by 6.7% year-over-year, to an annual rate of 16.5 million vehicles, the highest since May 2021, when the collapse in new-vehicle inventories was in full swing amid the semiconductor shortages, which resulted in dealers running out of vehicles to sell, plunging sales, spiking prices, and the widespread appearance of odious addendum stickers. By now, inventories have more than doubled, and it’s price-cutting time.
Sales picked up momentum over the past two months as automakers rolled out big incentives and discounts and as dealers made deals on models they were heavily overstocked on. Inventories have surged this year because prices are too high after the price-spike during the pandemic. But some models remain in short supply.
With today’s sales figures, our projection for total sales in 2024 rises to 15.93 million vehicles, the highest since 2019, and just a hair below 1986, which was nearly 30 years ago.
The ugly long-term reality is that new-vehicle sales, in terms of the number of units sold, have been a no-growth business for 25 years, interrupted by deep plunges. Only price increases and moving models upscale have inflated dollar-revenues for automakers in total. So that’s for the US market overall.
But there are exceptions, such as Tesla and Hyundai-Kia whose sales have soared from record to record, eating market share from other automakers, whose sales have plunged (our volume charts by automaker through 2023; update for 2024 coming in a month).
Too-high prices have had the effect of strangling unit-sales during the good times and crashing unit-sales during bad times.
New-vehicle inventories on dealer lots and in transit surged to 3.04 million vehicles at the beginning of November, the highest since May 2020, according to data from Cox Automotive. Supply at the beginning of November rose to 85 days, with 60 days being considered healthy.
Incentive spending by automakers in November soared by 43% year-over-year to $3,291 per vehicle sold on average, amounting to 6.5% of MSRP, according to J.D. Power estimates. Leasing drove some of the incentive spending. J.D. Power estimates that leasing accounted for 23% of retail sales in November.
Incentives still have room to increase as inventories continue to pile up. In 2019, incentive spending reached 10% of MSRP.
Ford, for example, reported today a 14% year-over-year sales increase in November. Battery EV sales surged by 21% year-over-year. Ford is promoting aggressive lease payments, 0% financing on some models, cash rebates on some models, etc. And Ford dealers are throwing in big discounts.
In a sign of things to come, Ford also cut the MSRP of its 2025 model F-series that just went into production, with the base F-150 XLT getting a $2,025 lower MSRP than the 2024 model year, a 4.3% cut of the MSRP, which has never occurred in the history of our illustrious F-150 XLT and Camry LE price index going back to 1990.
Even Stellantis is getting the drift of too-high prices, after a dealer revolt about its pricing policies and mismanagement. Incentives and discounts started flowing. And a few days ago, CEO Carlos Tavares was forced to spend more time with his family. Ram and Jeep dealers, after drowning in overpriced inventory, made some headway with big incentives and discounts, and over the past two months, supply has been coming down from astronomical levels.
“Gradual improvements in more affordable vehicle availability are likely to sustain the momentum of new-vehicle sales, while transaction prices and profitability are projected to moderate slightly,” J.D. Power noted.
And we have seen that in the CPI for new vehicles, which has been edging down ever so slowly and reluctantly for the past two years, after the spike. But it has remained amazingly sticky (unlike used-vehicle prices, which plunged).
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Unsure why anyone buys new now, even though I can afford any new car the values were just silly when I bought my SUV a few months back was easier to buy a low mileage one for cheaper even with a warranty.
Some trucks are asking 100k I’d rather buy more used exotics at those prices than mass produced trash at those prices.
There is a lot of gizmos on cars these days, and the warranty coverage is more important than ever. I agree used cars offer a significant cost advantage, however warranty coverage is worth a lot, and you lose some of it, buying used.
But, but, but… someone HAS to buy new cars, or there won’t be any used cars to buy, LOL
Started shopping for an EV for the wife. Given that she insists on a third row, not a lot of used inventory out there. Carmax has exactly one R1S.
I have no problem buying new cars. Zero. None. Zilch. To each their own.
The last used car I purchased was a 1971 Cougar convertible with a 351 4-speed. Since then six new cars. Kept my 1983 for 24 years.
I always buy or lease new cars. Reasons are:
Need warraty for peace of mind
Need newer cars for safety reasons
Newer cars are cheaper to me.
A point in case is: One can currently lease a 55K Hyundai Ioniq 5 for 2 years/24K miles or so for 6K one pay which comes with free electrify America charging plan.
I’ve never bought a new car, but I’m a big car guy who buys and sells cars as a hobby. Growing up poor I surounded myself with other car guys who all laughed at the the people who “wasted” money on new cars (while we changed clutches and water pumps on weekends). As I got older and richer (and started entering ALL car expenses in spreadsheets) I realized that for “most” people that drive 15K-20K a year and have one car a new car is the best bet (aka lowest all in cost per mile). For people that drive less than 10K a year a used car is often a better value.
A savvy chap knows his used car, he knows his car because he might need to fix it.
Buying a new car with taxes and insurance included is for other people.
When Im walking my neighborhood and see someone out working on their car I go up and shake their hand.
Does this include new vehicles that are leased?
I think ZIRP and and a push towards more leasing has allowed the automakers to increase prices and push models to higher prices.
“What are my monthly’s?”
Went back and RTFA again and I see it does include leasing.
🤣❤️
I’ve been looking at Ford Super Duty trucks and discovered that while they may be keeping the base MSRP low, they now engage in option bundling. You want the deluxe trim package to get powered seats? Oh, you’re also going to pay for the sport appearance package whether you like it or not.
Sure, the MSRP didn’t go up much (or maybe even down), but now if you want any of the popular options, you’re going to pay through the nose for those options because you’ll also be getting options you don’t care about.
At least on the Super Duties, there are certain options that are no longer even available on the lower trims, so you’ll be paying for the higher trim trucks just to get that “one” thing you really want.
I understand why they do option bundling, but as a tightwad, it really cheeses me off!
What you describe about options packages has always been going on.
Am I the only one that thinks it is funny that there is a “sport appearance package” for the “Ford Super Duty” (probably the least “sporty” vehicle sold in the US. A Super Duty weighs about two tons more than my “sporty” 997 daily driver and a ton more than my “not sporty” Landcruisers and Defender 90). P.S. If I could buy a new 911 that was similar in size and simplicity to the 997 I would buy one, but I’m on my third and I know I can keep getting them used with low miles since so many people buy them and rarely drive them.
Sport trims on pickups are hilarious, as is when they try racing me on the highway.
Bro that thing was built to tow, not go fast.
One of my economic views is that managing the interest rate is like riding a bicycle. You can’t have the handlebars set in the middle. You have to turn left and right etc and also when crashing a bike you overturn one way and then the other before coming off.
Anyway, my suggestion is that the gyrations in the US vehicle market are actually because price signallying got destroyed by the Fed and this is now the long played out consequence as prices and demand wobble around from left to right back to stable.
In fact, as a matter of record Wolf could put a link to the other vehicle articles posted so that the veering from under- to over-supply can be seen.
…so the Fed forgot how to lean and countersteer the economic bicycle?
may we all find a better day.
It would be interesting to see two other data series plotted against new vehicle sales: total vehicles in service, and average age of vehicles. Jalopnic had a headline a few months ago: “The average car on the road is a 14-year -old Toyota Camry” discussing how vehicles have gotten much more reliable and last longer on average than vehicles from the previous century.
But the population also grew by 40% since 1984, or by nearly 100 million. On a per-capita basis, new vehicle sales have collapsed, along with miles driven. I discuss this kind of stuff about once a year, and few people read it, LOL
You have the dip labeled great recession but shouldn’t that be cash for clunkers that lowered the number of vehicles in operation?
No. Cash for clunkers removed only 677,081 vehicles in total. It pales against the drop of 5.8 million vehicles in operation (VIO) over the two-year period in 2009 and 2010, which is what you see in the chart.
The 5.8-million-vehicle drop of VIO in two years was caused by the plunge in new vehicles sales in 2008 and 2009. Over those two years, new vehicle sales plunged by a combined 5.7 million vehicles, and people just kept driving what they had. In other words, the inflow into VIO slowed by 5.7 million.
There is a constant flow of vehicles out of VIO every year: salvage yard or exported (cash for clunkers went to salvage). Those are the only two outflows from VIO. New vehicle sales are the only inflow into VIO.
The math goes like this, using current data: Over the 12 months through June 30 2024: 15.5 million new vehicles were registered (inflow into VIO) and 11.9 vehicles went out of operation (salvage or exported), so VIO grew by 3.6 million vehicles to 291.1 million vehicles in Q2 2024, from 287.5 million in Q2 2023. (Experian registrations data).
I’m not sure how new cars CAN’T sell. People need to drive. They need to commute cross-city from the suburbs to their workplace in another part of the city. Public transportation sure isn’t going to cut it.
I don’t think people really like buying used cars. It’s like books: you’d rather pick up a new fresh clean novel at the drugstore than go to a library and share your book with another person. It’s not so much that people are germaphobes with used cars and “used” books as they just like having their own thing, something to call their own.
Whatever. I always get books from the library instead of buying them.
1:04 PM 12/4/2024
Dow 45,014.04 308.51 0.69%
S&P 500 6,086.49 36.61 0.61%
Nasdaq 19,735.12 254.21 1.30%
VIX 13.45 0.15 1.13%
Gold 2,674.10 6.20 0.23%
Oil 68.66 -1.28 -1.83%
just a continuation of the relentless meltup which has continued unabated from around october of last year, when rate cut mania started.
the economy has been more resilient than people thought possible, but make no doubt about it, this is not based on the economy or earnings.
p/e for the s&p is now at 31. schiller at close to 39. buffett indicator at 209%. there is no conventional valuation which shows stocks to be fairly valued, yet all of the analysts are saying “but trump will usher in a new era and the economy will boom.”
i’m skeptical, but who knows, maybe i’m too old and idiotic valuations are the new normal.
I believe it’s a matter of mass psychosis. As we switch political parties every 4 years a new group of investors have high hopes that just maybe things will work out. This is a perpetual motion economic driver…
I know there are some motorcycle riders on this site. Has anybody seen what is going on with “KTM motorcycles” right now. They were flying high just a few short years ago. Now… not so much. :-(
Ghost of McQueen-…from what I’ve gathered so far, Pierer appears to have waay over-bet production of KTM-group motorbikes on sales continuing forever at their dizzy pandemic pace, while not adequately dealing with engine warranty issues (excess of 80k unsold units as we speak), and related overexpanded production issues for high-end bicycles and e-bikes. (Not looking good for the KTM/GasGas MotoGP teams going forward, either, and happening when Liberty Media, owners of F1, are trying to navigate their purchase of MotoGP through EU scrutiny…). Layoffs coming with mutterings of a possible local Austrian state government bailout if ‘internal restructuring’ fails. imho, another instance of an industry Captain’s vision obscuring the necessity of seriously contemplating thorough and frequent SWOT analyses…
may we all find a better day.
It seems like few younger (under 40) people today have an interest in cars and even less have an interest in motorcycles. We are going to be down in Monterey this Christmas and just got the bad news that the Talbott Motorcycle Museum in Carmel Valley just recently closed for good…
“0% financing on some models”
The ghost of ZIRP lingers.
I wonder how long it will be before 0% promotional consumer financing finally dies off.