In the third quarter, as record sales and consumer spending declined, we talked to Tyson Jominy, Vice President of Data and Analytics at J.D. Power to get his insight on why this was happening and the impact it could have on the industry as a whole. Today, we chat with Jominy to find out if data has improved here in the final quarter and where things stand today.
Transaction prices were one of the strengths of October results. At J.D. Power, they saw transaction prices reach $44,000. That’s an increase of 20% from October 2020 and 28% from October 2019. Jominy says they did give some back in sales.
Vehicle grosses are reaching over $3,000, as opposed to $300 per unit, back in 2019. Jominy says these transaction prices are doing well for automakers and dealers. He says, now we’re at the point where sales are hurting one group more than the other. It’s the automakers getting hurt more than the dealers because sales are down.
Incentives are way down and are averaging about 4% of MSRP. The total dollars consumers are spending is down 3 months in a row. That’s hurting the automakers more than the dealers. Automakers are starting to see revenue, come down because of the sales volume pressure. Jominy says they’re seeing recession-era sales volume but overall high demand. Even seven straight months of record transaction prices can’t offset the current sales pace, which is back to 2011 levels.
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Inventory can’t hurt us anymore, says Jominy. It’s about production and whatever we produce is what we’re going to sell. He says the auto industry is ultimately about building and selling cars.
Plug-in and hybrid cars are up over 5% in October 2021, that’s up over 2% from October 2020. Jominy says we’re seeing about 60 to 70% gain in sales in these vehicles, in one year alone. What’s driving the industry change is Model Y, Mach-E, and Volkswagen ID.4. This is the first time EV SUVs are being sold.
In the future, Jominy says we will see an industry very much like it is now. Which are tight inventory, high transaction prices, and vehicles turning as fast as they arrive. Currently, 50% of vehicles are turning within a week of arriving at the dealership. Over 4.5 million consumers have been out of the market for the last two years. He says there’s a lot of potentials for dealer profits to be very high throughout 2022.
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