New Cars And Trucks Are A Little Less Scarce, And Pricey, On Average

S&P Global Mobility expects U.S. auto sales of around 1.3 million in July, an increase of around 18% vs. a year ago, due to pent-up demand and higher supplies of new vehicles, and despite ongoing affordability issues.

With greater supply, dealers report prices — and waiting lists for new vehicles — are down from recent highs. But some of America’s biggest auto retailers and factories insist new-vehicle inventory won’t go back to pre-pandemic levels any time soon, if ever.

The obvious reason is that scarcity drives prices higher.

That’s something dealers and auto manufacturers have come to appreciate. At first, plant shutdowns related to COVID-19 quarantines and social-distancing forced them into it, followed by an ongoing shortage of computer chips.

But now, the auto retail industry in general chooses to stick with short supplies and high prices, as long as the competition allows.

“I think all of our peers and ourselves have been talking about it, we’re not going to go back to ’19 levels. And we certainly don’t see that any time in our near future,” said David Hult, president and CEO of Asbury Automotive Group, Duluth, Ga., speaking of inventory, in a July 26 conference call to announce second-quarter earnings.

In a separate conference call, General Motors Chair and CEO Mary Barra and other GM executives used the word “discipline” a lot, to describe how GM is holding back on production if necessary, to protect prices and to reduce pressure to offer bigger incentives.

To be fair, GM also cut its own spending, and instituted employee buy-outs, to make itself more efficient.

GM CFO Paul Jacobson said GM purposely cut some production in the first quarter, to keep inventory flat, and margins strong. “So, we’re going to continue to watch that. But as we’ve seen, it’s provided tremendous benefits for us so far, and we’re going to continue to manage it that way.”

GM said its U.S. dealer inventory was up less than 4% at the end of the second quarter vs. the end of the first quarter, but its incentives as a percentage of average transaction price were 3.8%, or “nearly flat.”

At the same time, GM’s average transaction price was $52,248 in the second quarter, up $1,600, or 3.2%, vs. the first quarter.

Meanwhile, Asbury reported a 32-day supply of new vehicles as of June 30. That’s up from 26 days as of Dec. 31, and way up from just 13 days a year ago.

Days-supply is an estimate of how long it would take to sell a given supply of vehicles at the present monthly selling rate, if it were not replenished. Before 2020, a 60-day supply was considered the industry benchmark.

In the second quarter, U.S. auto sales were about 4.1 million, up 17.1% vs. a year ago, according to the Automotive News Data Center. For the first half, U.S. auto sales were about 7.7 million, up 12.9%, Automotive News said.

Contributor Jim Henry, a freelancer, also writes for Automotive News.