For over two years, the car market had a supply problem since the car makers could not produce enough to quench the customers’ thirst for new vehicles. This year, the situation increasingly turned into a demand problem, with customers delaying their purchase plans in the face of increased interest rates and economic uncertainties.
This is something that Cox Automotive evidenced in its latest market study. According to the company, U.S. light-vehicle sales were basically idling in the third quarter, with perspectives to hit the brakes in the next quarter. Cox had to cut its full-year new-vehicle sales outlook to 13.7 million light vehicles, down more than 9% from 2021 and the industry’s worst record in a decade. This is the third time that Cox cut the forecast this year, after starting at 16 million vehicles.
“It seems likely that much of the pent-up demand from limited supply is quickly disappearing as high interest rates eat away at vehicle buyers’ willingness and ability to purchase,” Cox Automotive senior economist Charlie Chesbrough said to Automotive News.
And it’s not just Cox Automotive that sees headwinds for the U.S. market. S&P Global Mobility, J.D. Power, and LMC Automotive also saw lower-than-expected sales in September. But even so, carmakers and dealers are more than happy with the situation. There aren’t any price cuts, and the usual holiday promotions are non-existent. Customers still wait for months to get their cars delivered.
The auto industry is doing just fine, despite (or rather “thanks to”) the low inventories. Tight supplies have helped keep the transaction prices sky-high. J.D. Power data and analytics division chief Thomas King expects the average transaction price to reach $45,622, a record for September and the fourth highest of any month on record.
But Cox Automotive analysts think the situation will change, albeit quite slowly. According to the firm, new-vehicle inventory jumped 41 percent — or nearly 350,000 vehicles — from last year’s record low. Automakers are expected to continue to limit production, though, so don’t expect the market to be flooded with new cars at once.
“We’re in a long-term trajectory [...] inventories are going to slowly rebuild,” Chesbrough said. “But no one is expecting a surge of vehicles being shipped around the country [...] and getting us back to a 60- or 90-day supply.”
Of course not. The car makers have no interest in doing so. But they should, because exciting things are going to happen. Pessimists warned a while back that incentives and promotions are not going back. It certainly doesn’t look so now, and we’ll see the tables turning rather soon. The economic situation is degrading, and people’s interest in buying new vehicles will quickly evaporate. We’ll see dealers again begging their customers to take their slow-selling cars off the lot.
“It seems likely that much of the pent-up demand from limited supply is quickly disappearing as high interest rates eat away at vehicle buyers’ willingness and ability to purchase,” Cox Automotive senior economist Charlie Chesbrough said to Automotive News.
And it’s not just Cox Automotive that sees headwinds for the U.S. market. S&P Global Mobility, J.D. Power, and LMC Automotive also saw lower-than-expected sales in September. But even so, carmakers and dealers are more than happy with the situation. There aren’t any price cuts, and the usual holiday promotions are non-existent. Customers still wait for months to get their cars delivered.
The auto industry is doing just fine, despite (or rather “thanks to”) the low inventories. Tight supplies have helped keep the transaction prices sky-high. J.D. Power data and analytics division chief Thomas King expects the average transaction price to reach $45,622, a record for September and the fourth highest of any month on record.
But Cox Automotive analysts think the situation will change, albeit quite slowly. According to the firm, new-vehicle inventory jumped 41 percent — or nearly 350,000 vehicles — from last year’s record low. Automakers are expected to continue to limit production, though, so don’t expect the market to be flooded with new cars at once.
“We’re in a long-term trajectory [...] inventories are going to slowly rebuild,” Chesbrough said. “But no one is expecting a surge of vehicles being shipped around the country [...] and getting us back to a 60- or 90-day supply.”
Of course not. The car makers have no interest in doing so. But they should, because exciting things are going to happen. Pessimists warned a while back that incentives and promotions are not going back. It certainly doesn’t look so now, and we’ll see the tables turning rather soon. The economic situation is degrading, and people’s interest in buying new vehicles will quickly evaporate. We’ll see dealers again begging their customers to take their slow-selling cars off the lot.