Bloomberg’s Kevin Tynan reviews new car supply data, affordability issues, and inflation

Inventory and pricing data from August is in, and once again, on Inside Automotive, we’re joined by Kevin Tynan, Bloomberg Intelligence‘s Senior Automotive Analyst, to give us an update on the market. 

First, the new California law prohibiting gas-powered new vehicle sales after 2035 is on many people’s minds. It tends to happen a lot—CEOs rotate, and those in charge now “may not be there in 2035,” Tynan explains. So much can change in five short years, so a tremendous amount could change between now and 2035. 

Consumers may purchase the vehicle from another state and drive it back to California, which could become a regular practice. Regardless, the companies will ultimately regulate just how many EVs go out for the first few years and do whatever is profitable. All-in-all, the carmaking world and consumers will react accordingly. 

Inventory has “kicked up,” Tynan says. Automakers see what’s happening at retail with their pricing, and as much as an extra million could enter the fray. Consumers could face the “pay sticker” situation, and processes improve by ordering online. The increase in inventory, however, is still a fraction of what it was in 2019. Tynan says that manufacturers are trying to find the “sweet spot” with pricing.

Auto retail professionals also saw some change in August and a softening of used car prices. 2022 could potentially be the last year of any low-priced, or general affordability used vehicles because lease penetration is low and the base of vehicles matches up. The average lease is three years, so anything leased in 2019 circles back to 2022. It would not be safe to say that used vehicle prices are decreasing, especially not at dealerships. 

Discussions about affordability are challenging to bring up in 2022, but one can look at the auto manufacturers’ data. Affordability is being hindered by trucks and EVs, it seems, but not necessarily because people are willing to pay more.

Related: 3 best practices for addressing higher vehicle prices with customers — Sean Gardner

Within Bloomberg Intelligence, Tynan says that professionals should not expect data to go back to what it was in the past. It’s not just unlikely; it’s impossible, as we’re heading towards an average of $50,000 prices.

The industry is seeing more jobs on average for July and August, gas prices are coming back down, and inflation is somewhat stabilizing, albeit at a high level. It is good news for automakers and retailers in terms of consumer demand. 

However, a large pool of buyers won’t pay for a new unit. In fact, with the numbers shifting, millions of consumers are switching to a used-only mentality, taking the $35,000 they would spend new to get used. But with both used and new prices going up, many consider merely drifting off to the sidelines and seeking car repair for the next few months (up to a year) instead. 

Because of this, there will be an uptick in average repair prices due to favorable demand, and prices are still too rich for many people. “It could force some people down a step or out of the market completely,” Tynan says, “and the average age of vehicles will increase.”