Buyers are willing to wait for the car they want, according to supply chain snarls.
The number of cars on lots is decreasing.
The longer buyers wait for a car, the less discounts they get.
For the past few months, car buyers have seen more vehicles at the dealership than they have in the past. Consumers could be in luck, but not much, after more than two years of little choice.
If there was a 60 day supply, auto dealers would keep at least enough cars on the lot.
As dealer supplies dropped to as little as a month's worth, COVID-19 limited production and jacked up prices. Production came back and demand went down in the back half of the year. The new-vehicle inventory hit a 53-day supply in November. In October and September it was 50 and 40 days, respectively.
Everything isn't going back to normal.
"We will never go back to the inventory levels that we were in the past," Mary Barra said in a Wolfe Research conference last February.
In the past few months, executives at Ford and Stellantis have said the same things.
The domestic brands have a 30 to 40 day supply, which is still very low compared to historic levels.
"It's definitely better than it was a year ago, but not as good as it used to be," Krelle said.
Customers will wait and pay for what they want, and that may be the reason for that. Even if they could return to pre-pandemic inventory and eliminate supply chain issues, car-buyers would still adapt.
42% of US consumers don't mind waiting more than a few weeks for their next car, according to a recent study. The shift in attitude could lead to more build-to-order sales, which would make big inventory less necessary.
Ford's CEO is banking on a low-inventory, build-to-order approach with EV's.
Farley said in a Q2 earnings call that the customer orders a vehicle and then we ship the vehicle to them. A low inventory model is what I mean.
Customers could be hurt by operating with lower inventories.
It doesn't mean consumers are going to have to keep fighting just to get any vehicle, but it shows that if carmakers don't need to have cash tied up in inventory, prices can likely stay high.
Maybe there will be one or two brands that are able to take advantage of customer frustration. Ivan said he expected the haircut to be similar to what they had seen before. They're never going to match that supply and demand exactly the same thing.
I expect someone to break from the pack and just juice their sales by having excess inventories and giving discounts.
Business Insider has an article on it.
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