Analysts believe that the auto industry's inventory crunch, which has been driving higher sticker prices, may end bargain buying at car dealerships. Bloomberg CEO Michael Manley said this week that new vehicle discounts would not return to preandemic levels. Instead, the pandemic is pushing the market to sell new vehicles at prices that are closer to the Manufacturer’s Suggested Retail Prices, also known as MSRP.
Manley stated that the pandemic had done more than press the reset button on inventory balance. You'll see some mitigation in the margin for new cars, but I truly believe that lesson has been embedded and they won't return to 2018, 2017, margins.
Marc Cannon, executive vice-president of AutoNation, stated Friday that consumers still want to buy despite the low inventory. Cannon stated that the industry has adapted during the pandemic and that this may have resulted in a market that could have changed forever.
"Manufacturers and dealers learned from this pandemic that it is not smart to overproduce. You really do need to produce at the level of customer demand. He said that pricing discounts are not something that will be reintroduced to the market.
The average price of a new car in December was $47,077, which is more than $10,000 more than the average customer paid before the pandemic.
Last year, semiconductor shortages hampered automakers. Coronavirus outbreaks, which caused supply chain problems in other areas, forced factories to close down and left some showrooms empty. This resulted in fewer cars being sold and record-breaking prices.
Tyson Jominy is vice president of data analysis and data management at J.D. Power responded to a tweet by Tyson Jominy, vice president of data and analytics at J.D.
"They will," he said.
John Murphy, an equity analyst auto at Bank of America, stated Friday that supply chain issues are likely to continue in 2018 and will remain a major issue through 2023.
He denied that it was in the best interests of the auto industry to maintain low inventories.
The automaker wants to make more cars and sell more of them. He said that there is nothing artificial or being held back.
Buyers who don't have a vehicle to trade in are particularly affected by low dealer inventories. Murphy stated that they will feel it in their wallets.
He said, "You will have a little more pain than someone who already has an asset, which is a vehicle that is going in to be traded in for a newer, used vehicle, or a brand new vehicle."
Murphy stated that other potential buyers are paying top dollar for the cars they're selling.
The reality is that you can get a good value for your vehicle if you trade it in. These high prices don't make it difficult to purchase a new car. They aren't great, but they aren't too bad.
Cox Automotive predicts a moderate industry recovery this year, with 16 million new vehicles being produced. This is an increase of 14.9 million vehicles from 2021. However, this number is still far below the auto production numbers prior to the pandemic.
In 2019, 17.1 million passenger cars were purchased by Americans.
Jominy stated that lower inventories have pushed up car prices, even for used cars, and that additional changes occurred during the pandemic.
It's been hard to produce the cars that we need. Jominy stated that there has been a shift in demand, but also that SUVs and pickup trucks are still in high demand.
"We are also seeing increased demand for luxury cars, which have had some of their most successful sales months" during this pandemic.