Consumers will have to pay higher price for new and used cars for next 2 years

(Detroit Free Press/TNS) –

high car prices
Matic Chevrolet owner Paul Zimmerman stands in an empty row among other places where new vehicles will be parked on a lot in Radford Township, Michigan. (Ryan Garza/Detroit Free Press/TNS/File)

Skyrocketing transaction prices and almost non-existent discounts for new and used cars — due to scarce vehicle stocks — will be the new normal for the next few years.

Industry experts say that even after the shortage of semiconductor chips ends, which is expected to start later this year and as of next year’s recovery period.

“We may never see normal or have redefined normal anytime in the near future,” said Jeff Schuster, LMC Automotive’s president of Americas operations and global vehicle forecasting. “Industry and consumers need to be flexible. For industry, this means moving around production and inventory as directed by the market.

Japanese automakers have mastered operating with lean inventory and matching production to what consumers will buy. They have been rewarded with an increase in US market share over the years.

The Detroit Three each lost market share despite reporting profits, prompting them to change their future market-going strategies and production plans.

A strange year of high prices, thin inventory, idle factories and a sea of ​​thousands of half-baked new vehicles parked in and around plants waiting for parts is due, in part, to the aftermath of COVID-19, because Automakers shut down their factories. North America for eight weeks last year. Also to blame is the worldwide shortage of computer semiconductor chips.

Big Prices, Few Incentives

An acre of barren concrete has surrounded showrooms in recent months as hungry car buyers drool over the handful of new cars plying a carrier, snapping them at full sticker price.

“It’s a scramble like I’ve never seen in the car business,” said Gordon Stewart, owner of Gordon Chevrolet in Garden City, Michigan. free Press In July. “Carloads would come in and half the cars were sold on trucks and the other half, people were on the ground picking them up as they got off the truck.”

But sales are slowing because some consumers either postpone purchases, perhaps expecting prices to drop, or can’t get what they want because of tight inventory.

The industry had an annual sales rate of 18.5 million cars in April, said Jessica Caldwell, executive director of Insights at Edmunds. This means that if replicated every month to that month, the industry would sell 18.5 million cars this year.

But last month, that rate fell to 14.7 million, Caldwell said, due to low inventory. If inventory were normal, the sales rate would have been 17 million or more, depending on consumer demand, she said.

Caldwell said the average transaction price for a new car last month was $42,832, a 9.5% increase over the year-ago period. In older cars, it is a similar trajectory as limited new car stock means fewer trade-ins, which creates a supply shortage even in used cars. She said the average transaction value for a used car is $27,245, up 29% from the year-ago period.

“Vehicle prices will remain high,” Caldwell said. “Some automakers like Ford have said that they will try to reduce inventory as bigger margins have made (dealers) happy. We may see higher prices for a longer period of time.”

She said prices will eventually end as inventory ramps up, “but we will see less incentive in the short term.”


All this is an opportunity for car manufacturers and their dealers.

“The good news is it allows the industry to reinvent itself,” said Charlie Chesbrough, senior economist at Cox Automotive. “The idea of ​​having hundreds of vehicles to choose from is an American idea. They don’t do that in other parts of the world.”

General Motors CEO Mary Barra has said the automaker has improved its production capacity and supply-chain management to better match what customers need. In the future, GM dealers will carry less stock, just enough for car buyers who want to drive home a new car the same day they buy it. But most of the customers will order online and wait for delivery.

Ford Motor Company introduced a similar go-to-market strategy when the chips shortage ended. And, earlier this year, Stelantis CFO Richard Palmer said that inventory may not need to be fully bounced back. He said a lean inventory picture makes the business more agile.

“I don’t think we will necessarily push back to the same level of stock that we had before,” Palmer said. “The organization is learning to work with the bottom of the stock and seeing the profit.”

An off-road test track?

Some car dealers also see a profit. The Matic Chevrolet in Radford Township, Mich., had 105 new vehicles in stock as of the middle of this month. In previous years, Matic would have had about 1,200 cars on its 13 acres, said Paul Zimmerman, vice president and owner.

“We had 79 vehicles in stock on July 1, yet we sold 210, so we got a bunch,” Zimmermann said. “My concern now is that there are only 100 or so in transit. But I know some dealers who don’t have any.”

Still, Zimmerman sees benefits. Because he’s selling cars so fast, the cost he usually pays in interest to keep the cars on his lot is “significantly less,” and it’s increasing his bottom line.

“I’m okay with reducing inventory levels to make them smart, so it reduces that waste,” Zimmerman said. “But you have to find that balance.”

Meanwhile, he wondered what would happen to his land if there were no thousands of cars in the future.

“In the last seven years we have leased and bought other properties for parking. So they, we want to disinvest or rebalance,” Zimmerman said.

As for their Chevy store along Telegraph Road near I-96, “It’s a great piece of property, so if they ever go past the restricted stocking level, we’re going to refactor it to have an off-road kind of feel.” Part of it will be a dirt road, a hill and you can get a real test-drive type of experience.”

Toyota defies gravity

Zimmerman is used to managing limited supplies throughout the city at its Matic Toyota store in Macomb Township, Mich. Toyota has generally limited its supply compared to Chevrolet. In doing so, Toyota does “a great job of creating demand” and supplying the right cars to certain markets.

Overall, Chesebrough said, Japanese automakers, particularly Toyota, have managed the chips shortage better than their American competitors.

Regarding Japanese carmakers, Chesebrough said, “They have defied gravity over the past few months.” “We are tracking those who have very weak inventory and yet their sales have been really good. … we’re really surprised by Toyota’s strength, and have a good quarter relative to some of the competition.”

A snapshot of the data shows market-share gains for Japanese carmakers. Here are the market share percentages from Cox Automotive for the first five months of 2019 compared to the same period in 2021:

—Toyota: 7.7% in 2019. In 2021: 14%.

-US Honda: 1.3% in 2019. 2.4% in 2021.

—Nissan North America: In 2019, 13%. In 2021, 13.7%.

—Mazda: In 2019, 0.9%. In 2021, 2.2%.

—Mitsubishi: In 2019, 1.2%. 1.4% in 2021.

-Subaru: 1.7% in 2019. In 2021, 1.8%.

-GM: In 2019, 19.7%. In 2021, 16.1%.

—Ford: In 2019, 21.7%. In 2021, 18%.

—Stellantis: In 2019, 18.6%. In 2021, 14.4%.

Earlier this month, Toyota Motor Corp. said it would suspend production for several days at nearly all of its plants in Japan in September, resulting in a 40% cut in its production plans, Bloomberg reported. That is, 360,000 fewer cars are being made next month.

chips will spill

LMC’s Schuster said there were about 1.1 million vehicles in inventory across the industry at the end of July, which is less than half of what it was at this time of year.

He doesn’t see the industry returning to those levels until 2023, with a recovery in the rest of this year and next year. But it does not depend on any new shocks such as variants fueling the pandemic again, or shortages of steel or aluminum pushing up commodity prices.

“There must be something there to interrupt us,” Schuster said.

Edmunds Caldwell agrees that the industry will not return to normal overnight.

“Where there is consumer demand, it will take a long time to match things up,” he said.

That’s why, according to Chessbrough, consumers can expect to pay higher prices for new and used cars, “certainly for the rest of this year.”

“We know there are a lot of partially built vehicles out there, so when the chips come out, there will be more supply. But I believe consumers are already looking forward to those vehicles. My message to consumers is Be prepared to pay a high price, not have room for much negotiation and be prepared to have a hard time finding what you want.

Nonton dan Sinopsis Kingdom: Ashin of the North Season 3

Leave a Comment