Despite a sharp drop in sales in March and orders to stay at home in many states, the auto market is showing signs of life. Even though sales were still in half, April’s purchases exceeded expectations. It seems that buyers have adapted to their environment, thanks to new tools like Autotrader Dealer home services.
However, as buyers return to the market, a different picture may emerge for the general purchase of cars. In previous outages, such as the 2008-2010 recession, manufacturing has not closed as completely as it did during the current pandemic. Car manufacturers have recently restarted factories, and it will take a few weeks not only to increase assembly, but also to get these vehicles to distribution pipes.
In other words, as buyers return to the market, demand may exceed current supply. There could be a shortage of popular models, which in turn can lead to weaker incentives and not as much good business as those expected from companies that should be hungry for sales.
A question of availability
The key to buying and selling cars will be inventory. Charlie Chesbrough, senior economist at Cox Automotive, Autotrader’s parent company, explains, “The amount of inventory is too much or too little depends on the trajectory of vehicle sales. Inventories may be sufficient if sales remain weak during the summer. However, if buyers return more quickly in May and June, inventory levels will continue to fall. And that means that buyers cannot be selective. There may be many vehicles in the lots, but may not be the color or finish desired by the buyer. “
Related Downloads:
Cox Automotive data puts the total number of new vehicles in stock at the start of May at around 3.3 million vehicles. There are many cars and trucks, but stocks have not been as low for over a year. Last May, the inventory of new vehicles was 4 million units. If demand exceeds current supply, dealers may end up with few vehicles for sale.
How do low stocks affect supply?
With a vehicle shortage, two things will happen. First, manufacturers will return incentives such as discounts, leases or low interest rates. Second, dealers will be less willing to negotiate if they know that a particular model is missing. This can have huge implications during traditional Memorial Day season sales. In short, good deals may not last as long as expected.
Due to market uncertainty over the supply and demand of vehicles, sellers are likely to take a more conservative approach to holiday shopping. Vehicles that did not sell long before the recession will likely continue to benefit from more generous incentives and room for negotiation. Vehicles with little supply will not.
The first incentives to reduce will be general programs, such as remittance and deferral of payments, as well as 0% financial agreements. While some people like Volkswagen
VWAGY
By extending these programs until June, manufacturers can choose to be more selective about how they apply these spiffs.
See also: Top 10 new car models of 2020
If you are looking to buy a vehicle in the coming months, you will need to adjust your expectations based on the type of transaction you will get and the level of leverage you will have in trading, particularly with regard to vehicles that are in insufficient number.
What warmth?
Locks, trucks and SUVs were the most popular segments of the industry. This dynamic continued despite the sharp drop in sales. Trucks were the top selling category in April. It was the first time that vans have outperformed traditional cars.
See also: 8 new luxury SUVs under $ 50,000
AND: These 3 electric vehicles are the lowest in 5 years
Restarting truck production is a priority for the Detroit-based brands. If the sales momentum remains strong for these vehicles, look for tight stocks and fewer incentives in this category, at least during the summer months.
Among Asian brands, Kia and Subaru are more vulnerable to shortages, as the two had the lowest number of stocks in the industry. While Kia has resumed production at its assembly plant in Georgia, which manufactures the Telluride 3-row SUV, the plant operates in just one shift. Subaru is also embarrassed by the fact that there aren’t many vehicles on the ground, especially popular models like the Ascent or the Outback.
It’s not
Brands struggling with slow sales and large inventory be fore closing include Fiat
FCAU
and mini. Sales of small vehicles declined for several reasons, including the sharp drop in gas prices. Others in the premium and luxury segments, such as Buick, Acura, Cadillac, Jaguar and Land Rover, transport more vehicles than the competition. As a result, they may have more incentives and a desire to negotiate.
Watch: 9 cars with long mileage
If the vehicle you are looking for is rare, the other alternative is to turn to the used vehicle market. A recent used vehicle with low mileage may well be the ticket. Currently, wholesale values have dropped due to a lack of used vehicle sales, making these cars relatively abundant. In addition, there are a large number of non-rental vehicles that will be returned. The beauty of buying a used vehicle is that it is already built.
Table of Contents Download