New vehicle supply has made a substantial recovery throughout 2023, culminating in December’s initial inventory total of 2.56 million units, the highest levels seen since early 2021.
That number represents a 57% year-over-year increase from the year-before period and a gain of roughly 6.7% from early November, according to Cox Automotive. Last month’s average days’ supply started at 69 days and ended at 70 but rose once more to 71 at the start of December. The increase in new vehicle supply coincided with an increase in sales, which rose 2% month-over-month and 7% from November 2022.
Despite this increase in sales, some automakers have opted to adjust production rates, along with their workforces, while new vehicle supply continues piling up. General Motors, Ford, and Stellantis have each moved to lay off thousands of manufacturing workers across the U.S. over the last three months, each citing a plethora of factors.
Ford cut labor at its Lightning pickup factory in October, shortly before lowering the plant’s production target for 2024 to reflect slower-than-anticipated demand in the electric vehicle segment. Stellantis blamed its layoffs on burdensome emissions policies implemented across multiple states, originally proposed by the California Air Resources Board, which effectively limit sales of gas-powered vehicles. General Motors’ most recent layoffs arrived as it shuttered production of the Chevrolet Bolt and Camaro.
Whatever automakers claim, pricing is likely the primary reason for their decision to cut production in spite of stronger sales. New vehicle prices have fallen by only 1.5% from November 2022, primarily due to incentives, even as demand shows signs of stagnating from its post-pandemic growth and inventories inch ever closer to pre-pandemic norms. By remaining reactive to changes in new vehicle supply, manufacturers can keep prices inflated longer, a strategy that also works to the advantage of dealers.
