Consumer behavior trends seemed to contradict narratives set by automotive industry leaders throughout October, according to a new intelligence report by CarGurus.
October presented challenges and even setbacks for many automakers, some of whom saw a sudden, if relatively small, decline in sales after a relatively strong year. Aside from unexpected in consumer behavior, multiple events contributed to the month’s complexity, not the least of which was the United Auto Workers strike. Although it began in September, the majority of the strike took place in October. The UAW also added new, high-priority factories to its list of targets throughout the month, further weakening OEM production.
However, while auto manufacturing was certainly impacted, car buyers encountered little, if any, issues finding and buying their preferred models. In fact, overall new vehicle inventory has risen 16% since the UAW strike began. Even among Detroit-Three OEMs, who bemoaned the loss of billions in revenue in October, inventory levels increased 10%. CarGurus attributes this disparity to the way in which the UAW selected targets for strikes. The union aimed its focus at facilities considered crucial to manufacturing operations or those building highly profitable vehicles.
The strategy resulted in different impacts for different segments. Midsize pickups suffered the most, with production rates of the Chevrolet Colorado, Ford Ranger and GMC Canyon plunging more than 50%. Off-road SUVs, such as the Ford Bronco and Jeep Wrangler, saw smaller but still significant reductions in inventory. As such, most buyers were able to find a vehicle or a reasonable alternative with comparative ease, provided they did not target the most affected models. In the months ahead, neither dealers nor automakers are likely to see any noteworthy effect on their bottom line as a result of the UAW strike, provided that autoworkers vote in favor of accepting Detroit-Three contracts and consumer behavior trends remain stable.
The strength of electric vehicle sales also seemed to contradict widely-held beliefs that the segment is seeing substantial declines in demand. For CarGurus, EV retail departures rose 142% from October 2022, while industry-wide, nearly all OEMs reported heavy improvements in sales of hybrid, alternative-fuel and battery-powered models, even as ICE sales decline. Based on consumer behavior trends alone, it seems buyers are showing a healthy interest in ditching their gas-powered cars. At the same time, however, gains in EV inventory drastically outpaced sales, rising 506% year-over-year. Electrified models also took longer to sell than other powertrains, waiting on lots for an average of 82 days before being purchased compared to the typical ICE timeframe of 64 days.
CarGurus notes that high prices and burdensome interest rates have made electric vehicles unaffordable to most consumers, preventing demand from growing at a more desirable rate. However, another issue is contributing to the growing disillusionment with the EV segment among OEMs and dealers. Given the rapid increase in electric vehicle production, it seems that automakers had expected the segment to grow exponentially in a short period of time, ignoring the economic hurdles preventing access. While consumer behavior trends indicate that demand is certainly spreading, the industry is experiencing something of a reality check, naturally leading some to feel disappointed. Going forward, OEMs will either need to cut back on production, as some already have, or focus on addressing obstacles to EV adoption, such as unaffordable prices, inadequate infrastructure and comparatively short driving ranges.