New-vehicle sales in the US have seen only a minimal increase in the second quarter, but with larger discounts and slightly reduced prices coming into play, the car market may be gearing up for a boost.
Industry experts anticipate that prices might dip even more and potential interest-rate cuts could make car loans more appealing. Yet, the overall rise in US sales was barely noticeable at 0.1% year over year, as elevated prices deterred many from entering the market, preliminary numbers from Motorintelligence.com revealed on Tuesday.
The end of June saw sales affected by cyberattacks targeting CDK Global's software, which is crucial for dealerships' sales activities. By Tuesday afternoon, CDD K confirmed most services resumed, although manufacturers like General Motors acknowledged that the disruption meant some sales spilled into the next quarter.
With inventories beginning to pile up on dealership forecourts, especially for pricey pickups and other high-end vehicles, analysts note that deals are being tailored based on vehicle demand. While smaller, less costly models and hybrid cars remain scarce, numerous customers are holding off purchases in hopes of snagging better deals later on.
"Waiting may be the optimal strategy here," implied Cox Automotive Senior Economist Charlie Chesbrough. Toyota, a leading manufacturer of popular gas-electric hybrids, reported a 9.2% sales increase from April to June. Honda saw a 2.7% rise in sales, while General Motors only managed a 0.3% gain and Hyundai reported a 1.8% increase. Subaru enjoyed a 5.4% sales boost.
On the other hand, Stellantis experienced a 20.7% drop in sales in the second quarter, with the Ram brand down by 26% and Jeep sales falling by 19%. Nissan sales dipped by 3.1%, while Kia was down by 1.6%. Collectively, car manufacturers reported selling approximately 4.13 million new vehicles from April through June. This puts them on track to reach nearly 16 million for the year, slightly above last year's 15.6 million.
Ivan Drury, director of insights at Edmunds.com, noted that interest rates for new vehicles are averaging just above 7%, a high figure for those who purchased or leased vehicles years ago but now need to replace them. Many, he said, are opting for the few remaining lower-priced vehicles in the mid- to upper- $20,000 range. "The stuff that's very affordable, that's where it's at," Drury stated. "You really have to have an attractive product at an attractive price for it to move today."
For example, sales of the Chevrolet Trax compact SUV, which starts at $20,400 excluding shipping, were up 152.7% during the quarter. Kevin Roberts, director of analytics for the CarGurus auto site, said that automakers want to continue producing higher-profit SUVs and trucks when a significant portion of buyers are after less-expensive vehicles such as compact sedans.
"You're seeing people search more and more for affordable vehicles. You're seeing people searching for under $30K," Roberts said. The US car industry has hit a significant turning point, according to Roberts, where manufacturers may need to offer discounts to reduce prices or alter their production strategies to "try to get more attractive price points and try to keep those inventory levels lighter."
He highlighted that a shift towards lower pricing could negatively impact Detroit's auto giants, who left the less lucrative small to midsize sedan market some years back because they struggled to turn a profit on these models. Ever since COVID-19 struck in early 2020, there's been a pressing shortage of vehicles due to a critical lack of computer chips hampering production, which together with robust demand, pushed the average vehicle prices close to $50,000 by December 2022.
However, this year has seen an improvement in chip availability, ramping up production and swelling vehicle supplies. Figures from Cox show that in June, there was about a 55% surge in dealership stocks with nearly 3 million vehicles, compared to last year. As inventories grew, the estimated sale price saw a slight decrease of 1% to around $48,400 last month. That's still 20% more than pre-pandemic figures and 3% down from the high of nearly $50,000 seen in December 2022.
Data provided by CarGurus indicates that the vehicles languishing longest on sales lots are predominantly large trucks or SUVs made by Detroit firms. At the top of the pile is Stellantis' Ram 1500, sticking around at dealerships for an average of 141 days. Roberts suggests that deals can be found on vehicles that have been sitting on lots for a while.
For instance, 6% of new vehicle sales listings from national dealers are for the 2023 model year. According to Motorintelligence, US electric vehicle sales saw an overall increase of 7% in the first half of the year, reaching 599,134. EVs made up 7.6% of the US new vehicle market, roughly the same percentage as last year.
Sales were boosted by lease deals, which include federal tax credits. Sales of gas-electric hybrids soared 35.3% from January through June, totalling 715,768 and surpassing electric vehicle sales. Plug-in hybrids, which can travel a short distance on battery power before switching to a gas-electric powertrain, also saw a significant increase.
Sales rose 24% to 159,399. Both options provide alternatives for those who worry about running out of power with an EV. Earlier on Tuesday, Tesla reported a 4.8% drop in its global sales for the second quarter, with a 6.6% decline in the first half of the year. The company does not disclose US. sales figures. Ford is set to release its sales numbers on Wednesday.
