AVERAGE NEW CAR PRICE EXCEEDS US$41,000, HITS RECORD HIGH
It has never been more expensive to buy a new car than right now, according to the latest sales forecast from J.D. Power and LMC Automotive. The average transaction price of new cars sold in July 2021 reached a record of $41,044 (all amounts are in US dollars). That beat the previous high of $39,942 set the month before.
A rare confluence of factors continues to drive up new and used car prices due to strong demand and constrained supply. “Too few vehicles in inventory mean the sales pace in July is well below the levels seen earlier this year," Thomas King, president of the data and analytics division at J.D. Power, said in a statement. "Conversely, the lack of inventory is driving the price of the vehicles to record highs as manufacturers and retailers continue to dial back discounts."
Cash-back discounts, low-APR financing, and other means of enticing customers to consider overlooked models lingering on dealer lots are at a low, as dealers have trouble filling lots. That's primarily due to the ongoing shortage of tiny semiconductor chips used in various components in new cars. The pandemic forced automakers to cancel orders amid recessionary concerns, and a surging demand in electronics devices during stay-at-home orders redirected global supply away from cars.
Dealers currently have 30%, or 932,000 vehicles for sale now versus July 2019, when there were 3.1 million new cars for sale. When new cars roll into lots, they now roll right out within a month; last year at this time, new cars sat on dealer lots for 75 days on average before being purchased. That turnaround is another record. Incentives passed on to customers has reached a record low of 4.8% of the average MSRP. The average incentive is $2,065 off the sticker price, which represents a decrease of $2,170 from a year ago, when dealers and automakers were desperate to move vehicles off lots as the full scope of the pandemic took hold. The supply-and-demand imbalance won't be corrected any time soon. Overall sales are expected to be about 15 million this year, down from 16.9 million in 2019, and off 300,000 units from last month's annual prediction, meaning supply remains constrained. "Inventory levels will not improve meaningfully in August and the sales pace will be depressed as many shoppers fail to find their desired vehicle," King said. "However, buyers who do find their desired vehicle will pay higher prices."
Dealers, and automakers, stand to gain. "Manufacturers and retailers will realize extraordinary profits on every unit that is sold" to offset the loss in volume, according to the forecast. Dealer profit per unit is expected to break another record at $4,260, which is the first time the metric has ever surpassed $4,000 for the month. Leading the charge are trucks and SUVs, a broad classification that accounted for 76.5% of new car sales in July. Many of the hottest models are coming with dealer markups called "market adjustments" ranging from $10,000 over MSRP on a 2021 Ford Mustang Mach-E to $25,000 on a 2021 Honda Civic Type R. Social media is full of inflated stickers, even for a 2021 Mitsubishi Mirage. That's more than 30% on a budget car that stickers for no more than $18,000.
Help may be on the way. Even though used-car prices remain high, the situation is expected to cool off, with wholesale prices dropping slightly in July for the first time since December 2020, according to J.D. Power. When it comes to buying a car, patience pays off; impatience pays more.
Source: The Car Connection
INDUSTRY CHIP WOES CONTINUE
Chip Crisis Threatens to Cut Auto Output by 7.1 Million Cars
The global shortage of semiconductors will cut worldwide auto production by as many as 7.1 million vehicles this year, and pandemic-related supply disruptions will hobble the industry well into next year, IHS Markit said. The lack of chips won’t stabilize until the second quarter of next year, with recovery coming in the second half, IHS said in a report Thursday. The grim outlook is further proof that the chip crisis is far from over. And the research firm’s forecast doesn’t include the latest cuts from Toyota Motor Corp., which plans to briefly pause output at 14 plants next month and slash production 40%.
Volkswagen’s Bumpy restart
Volkswagen AG plants are set for a bumpy restart after the traditional summer break as the car industry remains in the grip of a chip shortage that most recently engulfed holdout Toyota Motor Corp. VW’s Wolfsburg plant, the world’s biggest employing some 60,000 people, will restart with only one shift next week Monday through Friday, Europe’s biggest automaker said. Audi, the group’s biggest profit contributor, will extend the summer break by one week at its two factories in Germany as semiconductor supply remains “volatile and tense.”
The Latest Numbers on the Microchip Shortage: Toyota Cuts Add to Roll
Toyota’s announced cuts in production last week led to a significant rise in the number of vehicles lost worldwide resulting from the one-two punch of resurging COVID-19 infections around the world and an unyielding tight capacity for microchip production. Automakers cut an additional 481,707 vehicles out of planned production schedules because of microchip shortages, according to the most recent report from AutoForecast Solutions. Toyota accounted for the 10 largest factory reductions, with affected plants in North America, Japan and China.
Source: Automotive News
And Now... Volvo
Volvo Cars, owned by China's Geely Holding will halt production at its Swedish plant in Torslanda, on the outskirts of Gothenburg, during next week due to the shortage of semiconductor chips, it said on Monday. A global chip shortage over the past year has caused a major delay in manufacturing activity and forced several automakers to cut down on production. "Due to the current material shortage situation, triggered by a combination of global semiconductor shortages and new Covid-19 outbreaks, Volvo Cars has decided to pause production in Torslanda for the week of Aug 30-Sep 3," Volvo Cars said in an e-mailed statement.
Bosch Says The Semiconductor Supply Chains In The Car Industry No Longer Work
German technology and engineering group Bosch, which is the world’s largest car-parts supplier, believes semiconductor supply chains in the automotive industry are no longer fit for purpose as the global chip shortage rages on. Harald Kroeger, a member of the Bosch management board, told CNBC’s Annette Weisbach in an exclusive interview Monday that supply chains have buckled in the last year as demand for chips in everything from cars to PlayStation 5s and electric toothbrushes has surged worldwide.
Taiwan Tries to Reassure
Taiwan is doing all it can to address the global shortage of semiconductors, Economy Minister Wang Mei-hua said on Tuesday after talks with the newly-appointed de facto U.S. ambassador in Taipei, a problem that has idled some auto production lines. Democratic U.S. senators from Michigan and Ohio last week asked the Taiwanese government to help address the shortage, given that the island is a major semiconductor producer and seen as central to efforts to resolve the problem.
FORD’S TINY MAVERICK TRUCK HAS ATTRACTED 100,000 RESERVATIONS
Ford Motor Co.’s new tiny truck, the Maverick, is generating lots of early interest, with reservations for the hybrid pickup topping 100,000 and demand coming from California markets that typically favor imports. The reservations are nonbinding and don’t require a deposit, but Ford is confident they’ll convert into orders as they did with a similar system set up to build interest for the electric Mustang Mach-E and revived Bronco SUV. Ford is making a bid for entry-level import buyers with the Maverick, which starts at under $20,000 and gets 40 miles per gallon with the standard gasoline-electric hybrid version.
TOYOTA: OVER-THE-AIR UPDATES, FASTER PRODUCT CYCLES, GREENER CARS
Toyota’s top digitalization guru is touting big breakthroughs through the application of software and connectivity services, including faster product cycles and more fuel-efficient cars. Some of achievements will reach markets as early as this fall, when the second-generation Lexus NX arrives. The redesigned compact crossover gets over-the-air update ability, while the hybrid version has a predictive efficiency function that helps optimize use of the battery.
MERCHANTS FLEET TO EXPAND EV CHARGING INFRASTRUCTURE
The fleet space is looking to keep “current” with the newest vehicles entering the sector. On Wednesday, Merchants Fleet announced a partnership with Enel X — the Enel Group’s advanced energy services business line — to meet the infrastructure needs of the electric vehicle (EV) industry. As part of the partnership, Enel X will provide smart EV supply equipment (EVSE), installation and charging infrastructure to Merchants Fleet clients to support the electrification of fleets nationwide.
Source: Auto Remarketing
FAIR ENDS SUBSCRIPTION, LEASING PROGRAM IN PIVOT TO MARKETPLACE MODEL
Used-vehicle subscription service Fair has stopped signing up new subscription and lease customers as the company considers a possible bankruptcy filing and prepares to convert its business into a third-party marketplace. The Santa Monica, Calif.-based company plans to relaunch as a digital vehicle marketplace in early 2022, with the first quarter as a goal, CEO Brad Stewart told Automotive News.
U.S. AUGUST AUTO SALES TO FALL AS SUPPLY CONSTRAINTS CONTINUE
U.S. auto retail sales are expected to fall in August, as the global semiconductor shortage coupled with the fast spreading Delta variant of the coronavirus squeezed inventory at dealerships, consultants J.D. Power and LMC Automotive said. Retail sales of new vehicles are expected to fall 14.3% to 987,100 in August from a year earlier, they said in a report released on Thursday.
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