We were all anticipating relief from the inventory and chip shortages by now, but unfortunately, as most experts predicted, we are still dealing with the crisis in the third quarter of 2021. J.D. Power recently released its monthly forecast. On today’s show, we’re pleased to welcome Tyson Jominy, Vice President of Data and Analytics at J.D. Power, to walk us through the state of automotive today.
We didn’t have the inventory for August to live up to expectations. Jominy says we had this big summer selling season in front of us but no inventory and everything seemed to have caught up with us all at once. Retail inventory is below 950,000 vehicles versus 3 million in August 2019. Jominy says we don’t have anything in stock to sell to consumers that are showing up. Vehicles are turning about 50% in under 10 days.
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Total sales are expected to fall 33% from August 2019 and down 17% from last year. The sales decline is driven by a sharp fall-off in retail sales, with fleet sales remaining weak. What changed in August was that the retail side suffered for the first time. For the past 8 months, consumers set records on how much they were spending in the market. Jominy says prices are high, volume is now too low. He says demand is well above the sales pace. This past August, the average transaction price reached an all-time high of $41,400.
What incentives, says Jominy. Incentives are about $1800 a unit, down from nearly $4000 a unit, last year. He says there’s a temptation there, to want this ‘time‘ to continue. But in reality, it’s a fixed asset industry, says Jominy. Eventually, we’ll have more inventory and incentives and it’ll start to feel normal.
The bottom line for August was a bunch of missed opportunities, says, Jominy. It could have been a big month, with the demand there, transaction prices were there but this was the month that it just changed. It’s going to be a fairly tough half of the year but hopefully, in 2022 we’ll see improvement, says Jominy. In August, the average transaction price for used cars was up 24%. He says it’s a lot of money to be made on both new and used vehicles. Dealers are in the driver’s seat when it comes to negotiation and the sale.
Jominy ends the conversation discusses the uptick in online ordering. Now, things have changed to an order strategy and consumers are needing to work very closely with dealers to get what they want and it may take 6 to 8 weeks for the vehicle to come in. He says dealers have adapted pretty quickly to this new environment and it’s great to see it.
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