Ongoing COVID-19 related supply chain issues and a global semiconductor shortage have forced automakers, including Ford, to make massive production cuts in recent months. So it shouldn’t come as a massive surprise to hear that, when coupled with strong March sales and revived demand, new vehicle inventory has also plunged to its lowest level in some time, according to Cox Automotive.
The total U.S. new vehicle inventory has been on a steady decline since mid-December, landing at 2.66 million vehicles in March. That’s down from 2.82 million in February, and represents a 25 percent decrease from last year and is 31 percent lower than 2019. The average days’ supply of new vehicle inventory now stands at just 59 weeks, the lowest since October of last year, 41 percent less than a year ago, and 38 percent less than 2019.
Ford isn’t doing much better than the industry average, as it currently has 60 days supply of new vehicles on its dealer lots, and the situation doesn’t seem likely to improve anytime soon. “Spring 2021 is going to be difficult for shoppers with supply limited and demand surging,” said Charlie Chesbrough, Cox Automotive senior economist. “Vehicle buying always picks up in the spring. This year has additional tailwinds from rising optimism about the economy and vaccinations along with government stimulus checks.”
Chesbrough doesn’t see any sort of decrease in demand for new vehicles until at least this fall, and supply chain issues are likely to remain until at least the end of the year, according to a number of experts. As such, Chesbrough predicts the average days’ supply in April could fall even further, by as much as 15 days.
Strong demand and low supply have also led to fewer dealer and manufacturer incentives. Average incentives declined in March to an average of $3,416 per vehicle, down 15 percent from a year ago. Incentives made up 8.3 percent of the average transaction price for March, which came in at $40,472 – the lowest level of incentives since April 2015.
Meanwhile, full-size trucks had a below-industry-average inventory of 48 days supply in March, down from 61 in February, while both the Ford F-150 and Ford Super Duty are at a less than 56 day supply.
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Comments
Hah! 60 day supply is still, in my opinion, 30 days TOO MANY. if you are continually replacing each vehicle sold a more manageable “just in time” inventory pipestream not only reduces Floorplan interest but also cost of owned or leased lots to hold all that inventory.
Because every vehicle shipped to a dealer is considered a sale by the manufacturer, overproduction and flooding dealerships makes the manufacturer’s books solidly black. It is Accrual accounting mandated of big companies.
I live in a county, population 270,000 which “center city” of only 100,000, yet combined, the Honda, Mitsubishi, and Kia dealerships have around 750 new cars on the lot at one time. In fact the Honda dealer stores about 100 cars off site always. Add to that all the other nameplates (4 Ford dealers included) and there is probably a new car sitting unsold for every 50th adult in the county. Even less if not all own cars.. Extrapolate and 25% of adult drivers are being expected to buy a new vehicle every year? That means the entire private fleet turns over every 4 years, for vehicles that now last 3-4 times that. I could see back in the 50s and 60s when 100,000 miles was an extraordinary accomplishment and the tin comprising the 62 Falcon used to be 57 Fairlane but today there is no need for more than a 30 days supply unless all your cars are shipped across the seas.
Inventory of hot sellers, F150, Explorer, Escape typically is refreshed weekly or more at larger stores. In a normal market ~78 days is about average. A dealer needs to have several variations on hand; with and without sunroofs, trailer tow, 4×4 all trim levels, etc. if they are going to spot deliver.
In Europe and especially Japan, the majority order their vehicles. Real estate is too expensive to cover with unsold vehicles.
Not good for Consumers….. Supply & Demand is not resourceful with Dealerships not working with consumers on prices!