We continue to hear news of record pricing across the industry, so on today’s show, we’re learning where things stand today. We’re pleased to welcome Cox Automotive’s Chief Economist, Jonathan Smoke, to discuss third quarter auto sales and he’ll also give us a market outlook as we wrap up 2021.
Smoke says we haven’t reached the bottom of the inventory issues in the new vehicle market, yet. They’ve continued to see a slowing in new vehicle sales. Due to inventory challenges and the hurricane replacement demand, it’s created even more demand for used vehicles. There has been an upward trend in used vehicle prices. The key concern for dealers is that the average auction price for a vehicle is now higher than the average retail price. Smoke says demand stays strong.
The whole year’s performance has been about supply and it will continue to be that way says, Smoke. All of the Asian brands have gained quite a bit of share. They’ve outperformed because many of them started the year with more supply and had a broader range of vehicles. Smoke says they’re seeing brands like Toyota and Honda with hardly any supply left. They’re losing momentum at a time where we’re seeing some brands gaining momentum. He thinks Ford is one of the brands that have turned the corner and sees improvements in the coming months. Supply is going to dictate what happens this Fall.
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Smoke believes it’s likely going to be the back half of next year before we see a balance between supply and demand. We have growing pent-up demand, with delayed leases, purchases, and fleet buyers anxious to get orders fulfilled. Production would need to be at 100% for several months before we see a substantial change in day supply.
Q4 isn’t starting well. Smoke predicts, October will be about the same as September. He has a feeling there will be more action due to change in situations. This Fall, it may be more about gross margins and not volumes. The incentives numbers in September were at a 20-years low.
The growth opportunity is in the used car market, especially for the Spring. Dealers need to be well-positioned within demand inventory. Spring 2022 won’t be quite as strong as Spring 2021, but Smoke thinks it will be incredibly strong for the dealers who have learned to navigate and deal with the supply constraints successfully.
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