New car inventory has been steadily decreasing since December on two main factors: extremely strong buying behaviors by an increasingly confident nation, and a struggle to keep up production volume due to the notorious chip shortage. At the end of May 2021, the days’ supply of new vehicles industry-wide drooped to just 44 days. That’s a 15-day difference from just a month previous and 75% below the end of April 2020.
The Cox Automotive report puts total unsold new vehicle inventory in the US at 2.24 million units toward the end of April, roughly 420,000 vehicles fewer than at the end of March. It shows how dramatically the chip shortage has been affecting production while dealerships are riding the wave of ready-to-buy customers coming into their stores.
Nationwide, salespeople and dealerships are experiencing the best months some have ever seen, as is the case at Philadephia-area Conicelli Autoplex dealers. Many are finding that car sales are better than pre-pandemic, often due to worsening sentiment over shared or mass transportation, combined with cash in hand from stimulus checks that finally make a car affordable.
Brands suffering more than others
Days’ supply is an average of 44 across the industry, but some brands are feeling the pressure more than others. Toyota and their highline brand Lexus have the fewest days’ supply, according to the Cox Automotive data, at just 23 days and 29 days respectively. Close behind are General Motors brands GMC at 30 days and Chevrolet at 31 days, followed by lower-volume brands in the US such as Kia, Subaru, Land Rover, MINI, and Mercedes-Benz.
Charlie Chesbrough, senior economist at Cox Automotive, said, “The industry is in uncharted territory by trying to maintain robust sales with this low level of inventory. Supply was down significantly, yet April sales finished at an 18.5 million seasonal pace. So, limited stock does not appear to have had much impact buyers – yet.
“Some high-volume models are in very limited supply, and May’s sales numbers could suffer as a result.”
Average listing price recedes slightly
After a steep climb over the past six months, the average listing price for new vehicles backslid slightly for April to $39,633 from March’s $39,717. While barely worth mentioning, the lack of growth in average listing price reflects a few criteria for the industry.
Dealers have been able to hold gross profit better with low inventory – a fact that’s evident in conversations with sales managers and salespeople across the country and driving profitability for stores.
The types of vehicles available have been shaping the average listing price. Premium and luxury brands have low inventory levels with those over $60,000 at under 40 days’ supply, and the ever-popular $30000-to-$40,000 segment close behind. It’s the economy vehicles and passenger cars in the $20,000-to-$30,000 range that have the most inventory, and car shoppers are choosing them at a higher rate simply based on availability.
Tight inventory entering May might begin to affect some dealers, particularly in the aforementioned brands that are most affected. However, the resourceful auto industry seems to find a way through all challenges, and ‘watch and wait’ might be the best way to see how it plays out this month.
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