Auto shoppers aced out of the new vehicle market by high prices and low to no discounts are about to get back into the game while sales of electric vehicles are expected to only modestly improve this year. Those were some of the key findings revealed Monday by Cox Automotive in a webcast.
While the average transaction price for new vehicles hovered around the $50,000 mark for the last few years due to Covid pandemic-caused inventory shortages, supply chain interruptions resulting in automakers pulling back discounts and high auto finance interest rates that’s all changing.
Indeed, it’s changing so much, it inspired Cox Automotive chief economist Jonathan Smoke to declare, “We’ve been been through the good and bad times and now we’ll see sales rise gently as prices and rates fall, so supply is back, giving consumers the weapon of choice. With that weapon of choice we officially bid farewell to the sellers market.”
Low inventories enabled dealers to charge sticker price or higher and automakers saw no need to offer discounts since they had little to sell. While inventories still aren’t quite up to pre-pandemic levels they’ve greatly improved.
The year ended with nearly 2.7 million vehicles available up over 900,000 units or 51% from the end of 2022. In comparison, industry supply averaged about 3.5 million new units in 2019 pointed, out Cox Automotive senior economist Charlie Chesbrough.
It’s all encouraging news for the consumer.
“The seller strength has eroded as supply has returned,” said Chesbrough. “Price share of MSRP is now closer to 98% suggesting that price haggling has also recovered in the vehicle market. So the pricing conditions in the marketplace are moving away from sellers towards the buyer’s favor and we expect this trend to continue into 2024 for lower prices and more flexibility is good news for vehicle shoppers and will support sales.”
Choice, however, depends on the brand.
There are over 100 days supply on dealer lots for Buick, Mitsubishi, Infiniti, Jeep, Chrysler and Lincoln brands, according to Cox research. But there are fewer than 40 days supply of Toyota brand vehicles awaiting sale. The national average is 70 days.
As for electric vehicles, 2023 was strong, but growth in 2024 is less certain.
“2023 was the year the EV with many bumps and zigzags along the way,” said Stephanie Valdez Streaty, Cox Automotive director of industry insights.
EVs reached a milestone of 1.1 million units sold in 2023—about 8% of all new vehicle sales, a 46% year over year growth.
But any expected growth this year will not be evenly distributed across the country as the majority of sales have been concentrated on the west coast and “pockets” of the east coast according to Streaty.
However the combination of a glut of EVs on dealer lots, hovering at a 113 days supply, and discounting led by Tesla, could at least mitigate one of the chief reasons consumers cite as a reason for hanging onto their internal combustion engine, or ICE, vehicles.
“The average price paid for new electric vehicle in December was $50,798, slightly down from $52,362 in November and supported by incentive levels well above the industry average in December,” said Streaty. “EV incentives reached a high point of 2023 at 10.6% of ATP, closing the year out EV price premium narrowed to around $2,000. During 2024 with more competition and decline in battery prices, we should see continued movement to price parity between EVs and ICE vehicles.”
Looking at the overall market, Cox research predicts sales of new vehicles should edge up this year to 15.7 million total units up from 15.2 million in 2023 while used vehicle sales should rise to 36.2 million from 35.9 million last year as inventories improve.
The bottom line for consumers is with more cars and trucks on dealer lots leading to greater discounting the years of narrow choices and unapproachable pricing are likely ending.
“After four years of anything but normal, we’re expecting balance to return to the U.S. auto market in 2024,” predicted Smoke. “We’re in for nothing like the last three years and that will clearly be better for American consumers and fleet buyers who will find more choices, better deals, and better access to online buying tools.”
That all leads to reiterating Smoke’s original declaration, “we officially bid farewell to the seller’s market.”
