Fresh reports on the state of new vehicle sales in the United States point to 2023 finishing strong for automakers and dealers alike, and maybe for consumers as well. New vehicle inventories, those new cars, SUVs and trucks that are sitting on dealer lots, are up to almost 2 million units.
According to a report by Cox Automotive, new vehicle inventory is right about 1,960,435 vehicles, which translates to a 56-day supply at current rate of sales. That inventory number is up by 39% year-over-year, and up about 7,000 units from a month ago. The last time unsold inventory was over 2 million units was in the depths of the pandemic in April 2021.
In general, inventory is regarded as a necessary evil in business, since it represents capital that is tied up but not producing returns. However, market indicators show U.S. dealerships are on track to sell more new vehicles in 2023 than they have since before the pandemic.
According to a new report by Urban Science, the industry can expect “continued stability for the U.S. automotive retail network through the first six months of 2023, and a 13% rise in new-vehicle sales — primarily driven by non-retail sales and electric vehicle adoption.”
Electric vehicles comprised 7.4% of new vehicle sales through the first six months of 2023, according to Stephanie Brinley, associate director of AutoIntelligence for S&P Mobility. That’s up from 5.8% in 2022 and just about 1% in 2019.
The Urban Science report notes, “Dealership throughput — the number of vehicles a dealership sells — is projected to rise to 842 in 2023 (from 759 in 2022), which would be the highest throughput level the U.S. automotive retail network has seen since 2019, prior to the arrival of the COVID-19 pandemic.”
Record Market Share for EVs
According to the Urban Science report, 664,104 EVs and Plug-in Hybrids (PHEVs) have been sold across the United States as of July 1. This sales pace reflects a 56% year-over-year increase for the same period in 2022.
“Based on current data, the company projects this sales trend to continue throughout the remainder of the year and for the industry to achieve EV sales in excess of 1.3 million units in 2023,” the report said.
Further, Urban Science states that EVs and PHEVs accounted for more than 10% of vehicles sold in nine of 50 states during the first six months of 2023. California, New Jersey, Florida, Texas, and New York accounted for 57% of all EV and PHEV sales nationwide during the same time period.
What does this mean for consumers?
Increased inventory on dealer lots typically means that competition on price will increase as those dealers seek to turn inventory into cash. As TheDetroitBureau.com reported last week, the smallest year-over-year price increase in the previous 10 years occurred in July 2023, when Americans paid an average of 0.4% more for a new car than they did a year earlier.
The average transaction price for a new car in July, according to Kelley Blue Book, was $48,334, down 0.7% from June’s average transaction price of $48,671 and only $199 higher than it was a year earlier.
Transaction prices are down 2.7%, or $1,335, from the beginning of the year, which is the greatest decline from January to July in a decade.
“New-vehicle price inflation has all but disappeared in 2023,” said Rebecca Rydzewski, research manager at Cox Automotive. “New-vehicle prices, primarily driven by cuts in luxury and electric vehicles, are decreasing as inventory is steadily improving. With higher inventories and higher incentives helping to keep downward pressure on prices, there certainly are good reasons for shoppers to be heading back into the market.”
But it’s not merely EV price cuts that are shrinking price increases, as incentives are reappearing as dealers are restocking and inventories rise. The amount spent on incentives by automakers grew in July for the ninth straight month, reaching its highest level since October 2021 with an average of $2,148, or 4.4% of the average transaction price. Spending on incentives was 2.4% of average transaction price a year ago.With inventories and incentives rising, it looks like the fall of this year could be a great time to get into a new vehicle, especially if consumers have been holding out until absurd dealer markups ended.
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- Source: https://www.thedetroitbureau.com/2023/08/new-car-inventory-up-sales-forecasts-up/
