The U.S. auto industry’s third quarter was marked by competition driven not by price, but by supply, Brian Finkelmeyer, senior director of new car solutions at Cox Automotive, said in a statement today. Wholesale shipments to dealers reached 83% of normal volumes in August and September, he said.
“The dealers able to keep inventory moving are the ones who are earning healthy allocations from their automaker partners. In the market right now, inventory is king,” Finkelmeyer said. “This race for inventory is likely to continue for the foreseeable future.”
Used-vehicle inventory is also squeezed as loan-assistance programs have kept repossessions low, consumers are less likely than usual to trade in for a new vehicle, and fleet companies aren’t unloading old inventory at normal levels, Charlie Chesbrough, senior economist for Cox Automotive, told Auto Finance News. “As a result, we’ve seen the available supply really fall quite dramatically for the used market,” he said.
Demand, however, remains strong and is keeping used-vehicle prices high, Chesbrough said. “Vehicle prices are likely to remain high, even if we do see demand wean,” he noted. “As a result, the dealers and the OEMs don’t have to do aggressive incentives or discounting, and all of that means it’s going to be a little bit less affordable to buy a vehicle.”
The new-vehicle market is struggling from a lack of next-generation options. The pandemic delayed new-vehicle launches, including marketing and production, leading to 2021 models making up about 3% of current dealer inventory, compared with this time last year when 2020 models represented 25% of inventory at dealerships, Chesbrough said. Consumers may hold off on buying a new car amid a lack of “the latest and greatest,” Chesbrough added.
“Part of the reason that we’re seeing such tight inventories on the new side [is] that there’s a whole bunch of product that just wasn’t made. They’re still trying to catch up with that,” he noted.
Inventory within the new-vehicle market is clawing back, however, as new-vehicle deliveries in September increased 6.1% from the same period in 2019, factoring two more selling days, according to Cox Automotive. The auto industry is on track to reach sales of 13.9 million units by yearend, a year-over-year decrease of 16%. The Seasonally Adjusted Annual Rate (SAAR) in September was 16.3 million, a 5% YoY decrease but an increase of 7.24% from August’s 15.2 million.