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Inside the Numbers New Vehicle Inventory Climbs as Sales Remain Steady

Inside the Numbers New Vehicle Inventory Climbs as Sales Remain Steady - Mounting Inventory Triggers Production Cuts and Incentives

The mounting inventory levels of new vehicles in the US have prompted some automakers to take action.

Automakers have implemented production cuts and increased incentives to boost sales and manage the growing inventory.

While the inventory level remains low by historical standards, the steady sales have not been able to keep up with the rapid increase in supply, leading to these measures by the industry.

The new vehicle inventory in the US has reached a record high of over 25 million units, marking the first time in two years that the inventory has surpassed this milestone.

This significant increase in available vehicles has led automakers to adjust their production strategies.

The luxury vehicle segment has experienced a 62-day supply of inventory, while non-luxury vehicles have a 52-day supply, indicating a notable difference in the distribution of available models across the market.

Interestingly, despite the mounting inventory, sales have remained relatively steady, with a 15% increase in July compared to the previous year, suggesting a continued demand for new vehicles even as supply levels rise.

To manage the higher inventory levels, some automakers have implemented production cuts, such as Stellantis reducing a shift at their Jeep plants in Detroit and Toledo, Ohio, showcasing the industry's agility in responding to market conditions.

In November, new vehicle transaction prices fell by 15% year-over-year, the lowest level in two years, likely due to increased discounts and incentives offered by automakers to stimulate sales and clear the growing inventory.

The days' supply of new vehicles in June was 56, up 51% from a year ago, with 876,000 units more inventory compared to the previous year, highlighting the significant expansion of the available vehicle pool for consumers.

Inside the Numbers New Vehicle Inventory Climbs as Sales Remain Steady - Forecasted Surge in New Vehicle Sales for 2023

The forecast for new vehicle sales in 2023 is positive, with an estimated 15.46 million units sold in the US, representing a 7% increase from 2022.

Of these sales, 76% were hybrids and 19% were plug-in hybrid electric vehicles (PHEVs), marking increases of 2% and 0.6% in market share, respectively.

Industry experts predict a gradual normalization of production in the coming months, leading to further improvements in vehicle availability and potentially mitigating the impact of ongoing supply chain issues.

The forecast for new vehicle sales in 2023 in the US is expected to reach 154 million units, representing a 7% increase from

Hybrid and plug-in hybrid electric vehicles (PHEVs) are expected to dominate the market, with hybrids accounting for 76% and PHEVs for 19% of new vehicle sales in

New vehicle inventory levels have increased significantly, reaching 17 million units at the start of 2023, providing more options for consumers.

While Q4 2023 is projected to see a 2% decrease in sales compared to the same period in 2022, the full-year sales are still expected to grow by 6% to 155 million units.

General Motors (GM) has maintained its position as the top-selling manufacturer, while the Hyundai Motor Group has surpassed Stellantis in market share.

Honda experienced the largest year-over-year sales increase among the major manufacturers, showcasing its strong performance in the industry.

JD Power forecasts a 13% increase in new vehicle sales in November 2023, driven by improved inventory levels and affordability, suggesting a positive outlook for the final months of the year.

Inside the Numbers New Vehicle Inventory Climbs as Sales Remain Steady - Dealers Embrace Discounts to Clear Excess Inventory

Dealerships are offering significant discounts and incentives to clear the growing excess inventory of new vehicles, as sales have remained relatively steady despite the surplus.

The average new car price has fallen to nearly a 2-year low, with discounts making up over 6% of the price, more than double the discounts from a year ago.

This situation has led to lower profits for dealers, who are facing the challenge of managing the inventory buildup and stimulating demand through creative pricing strategies.

The average price of a new car fell to nearly a 2-year low of $47,218 last month, with incentives making up 6% of that price, more than double the discounts from a year ago.

This suggests dealers are getting more aggressive with pricing and incentives to move their excess inventory.

The average gross profit margin on a used car ranges from 15-30%, while new cars have an average gross profit margin of just 15%.

This indicates dealers may be more incentivized to sell used vehicles, which can be more lucrative, unless they can clear out the new vehicle backlog.

According to Cox Automotive, as of February 2023, new vehicle inventory supply is at 80 days, which is 870,000 units or 50% higher than the same time last year.

This significant buildup of inventory is putting pressure on dealers to offer discounts.

The Cox Automotive days' supply index for new vehicles is at 80, up 38 from the same time last year.

This metric shows how quickly the inventory levels have climbed, exceeding historical norms.

In December, the average new car sold for $49,507 and could exceed $50,000 in the coming months.

This high pricing, combined with the inventory surplus, suggests dealers may need to get creative with their discounting strategies.

Dealers' profits are expected to be lower due to the increased inventory and need for discounts.

This could lead to a reshuffling of the industry as dealers adapt to the new market conditions.

The luxury vehicle segment has experienced a 62-day supply of inventory, while non-luxury vehicles have a 52-day supply.

This disparity indicates dealers may need to prioritize different discounting strategies for their luxury and mainstream models.

The inventory buildup is attributed in part to new vehicle sales remaining steady, despite ongoing concerns about economic uncertainty.

This suggests consumer demand has remained resilient, even as supply has outpaced it.

Inside the Numbers New Vehicle Inventory Climbs as Sales Remain Steady - Luxury Vehicle Prices Maintain Stability Amidst Market Shifts

Despite market shifts, luxury vehicle prices have remained relatively stable, with the average price paid in December 2023 decreasing by less than 1% from November to $62,523.

While incentives for luxury vehicles have increased, they still account for only 6.2% of the average transaction price, indicating that luxury automakers have been able to maintain pricing power amidst the changing market conditions.

Luxury vehicle prices remained relatively stable in December 2023, with the average price paid being $62,523, a decrease of less than 1% from November and down 8% year over year.

Luxury brand sales increased by 6% year over year in a market that posted an 4% increase, indicating the continued strong demand for premium vehicles.

Luxury share of the US market was above 20% for the first time on record, showcasing the growing appeal of high-end automobiles.

Incentives for luxury vehicles averaged 2% of the average transaction price in December 2023, suggesting manufacturers are maintaining their pricing power.

The largest year-over-year transaction price increases came from Ram (5%), Hyundai (4%) and Porsche (1%), highlighting the pricing power of select brands.

The luxury car market size is expected to grow from USD 63 billion in 2024 to USD 65 billion by 2029, at a CAGR of 55%, indicating a robust outlook for the high-end automotive segment.

In November 2023, the average price paid for a luxury vehicle was $63,235, down 5% year over year, suggesting manufacturers are proactively managing pricing to maintain market share.

The luxury car segment made up about 5% of the light vehicle market in the United States in June 2021, underscoring the niche but significant role of premium automobiles.

While new vehicle inventory has climbed, the luxury vehicle segment has experienced a 62-day supply, compared to 52 days for non-luxury vehicles, highlighting the resilience of the high-end market.

Inside the Numbers New Vehicle Inventory Climbs as Sales Remain Steady - Exponential Growth in Total US New Vehicle Supply

The total supply of available unsold new vehicles in the US has increased significantly, reaching 2.56 million units - a 57% or 925,000 unit increase from the same time last year.

This exponential growth in new vehicle inventory has prompted automakers to implement production cuts and increase incentives to boost sales and manage the growing supply.

While sales have remained relatively steady, the rapid increase in available vehicles has led to more discounts and a slowdown in price growth as dealers work to clear excess inventory.

The total US new vehicle supply has experienced exponential growth, reaching a record high of over 25 million units in 2023, marking the first time in two years that the inventory has surpassed this milestone.

Despite the mounting inventory, new vehicle sales in the US have remained relatively steady, with a 15% increase in July 2023 compared to the previous year, suggesting a continued demand for new vehicles.

Electric vehicle sales grew by 33% to nearly 270,000 units during the first quarter of 2023, a slowdown from the previous year's growth rate, indicating a potential shift in consumer preferences.

The average listing price of new vehicles in the US has climbed to around $47,368, with electric vehicles and hybrids accounting for over 16% of total 2023 US new light-duty vehicle sales.

New vehicle inventory has continued to stabilize, reaching around 195 million units available, with a days' supply in the mid-50s, although electric vehicles have twice the days' supply compared to all new vehicles.

New vehicle price growth has slowed, and discounts have increased due to bloated inventories for some brands, resulting in the average new car price falling to nearly a 2-year low of $47,218 last month.

Total vehicle sales are expected to rise, with forecasts predicting a 1% increase in 2024 to 7 million units, driven by strong consumer demand and improving supply.

The first half of 2023 is expected to see a significant increase in new vehicle sales, with a predicted 6% growth to 65 million units, suggesting a positive outlook for the industry.

The luxury vehicle segment has maintained price stability, with the average price paid in December 2023 decreasing by less than 1% from November to $62,523, indicating the continued strong demand for premium automobiles.

Inside the Numbers New Vehicle Inventory Climbs as Sales Remain Steady - Electric Vehicles Face Inventory Oversupply Challenge

The electric vehicle (EV) market is facing an unprecedented inventory oversupply challenge, with some new EV models spending months on dealer lots.

This surplus of EVs, coupled with softening consumer demand, has caused financial issues for some EV manufacturers and dealerships, prompting adjustments in production and sales strategies to address the imbalance between supply and demand.

Despite the high EV sales figures, concerns have emerged regarding the sustainability of demand, as the rate of growth may not keep pace with the rapid increase in EV production.

Despite the growing inventory of electric vehicles (EVs) in the US, reaching a nearly 4-month supply, annual EV sales surpassed 1 million units in November 2022, representing a 507% year-over-year increase.

In China, greater competition among EV frontrunners has led to a decrease in electric car prices, with compact electric cars and SUVs dropping by up to 10% in 2023 relative to

Tesla, the market leader, once again slashed prices by up to 6% for its Models 3 and Y in early 2024, causing competitors to follow suit and adjust their pricing strategies.

Some new electric models, like the Ford Mustang Mach-E, have an inventory supply of over 284 days, posing challenges for dealerships in managing the unsold EVs and their financial implications.

While US first-quarter auto sales grew 1% in 2023, the slowdown in EV sales due to the inventory surplus has prompted automakers to focus on light trucks and larger vehicles.

Despite the high inventory levels, the luxury car market size is expected to grow from USD 63 billion in 2024 to USD 65 billion by 2029, at a CAGR of 55%, showcasing the robust outlook for the high-end automotive segment.