April Auto Industry Update: New Vehicle Inventories — And Demand — Strong For Now.

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April Was Encouraging: Inventories are up, demand is up, but will both remain strong?

For the auto industry, things continue to improve…slowly. April saw the highest level of new vehicle production in two years — and it was greeted by brisk and increasing sales despite rising interest rates. It is this demand which is keeping the supply tight, but loosening — all of which is pretty good news. April marked the highest level of supply since April 2021. Supply was up 71% from a year ago, or 790,000 units higher. (The total U.S. supply of available unsold new vehicles stood at 1.90 million units at the end of April).

Part of the demand was a result of incentives that reached their highest levels at 3.6% of the April ATP, averaging $1,714 per vehicle. On a slightly down note however, April also saw the average listing price of a new vehicle return to above $47,000. Moreover, interest rates may drive some buyers away. “New-vehicle inventory continues to improve, supporting a pick-up in the sales pace,” said Charlie Chesbrough, Cox Automotive senior economist. “Clearly, pent-up demand is being unleashed. How much pent-up demand exists is the question. We still expect sales will slow in the second half as economic headwinds, particularly rising interest rates, grow.”

Battling Back From Historically Low Inventories

The industry continues its recovery, but we ain’t there yet. While inventory is up substantially from 2021 and 2022 levels, it remains low by historical standards. At the end of the pre-pandemic, pre-chip shortage in April 2020, the total supply was 3.51 million vehicles for days’ supply in the triple digits. In April 2019, supply was 3.88 million vehicles for a 95 days’ supply.

…And Battling Higher Prices Seen In April

After price cuts in March brought average prices down to below $47,000, the average new-vehicle listing price increased each week in April to beyond $47,000, finishing the month at $47,409 — the highest average listing price since early February, up 5% over one year ago.

“Prices have been at this growth rate since February and are holding up well despite economic uncertainty and rising interest rates,” said Chesbrough. However, the average price Americans paid for a new vehicle in April remained below the manufacturer’s suggested retail price (MSRP) for the second straight month.

“Some brands and segments have far too much inventory, so we are seeing discounts and incentives increase,” said Chesbrough. “We also are seeing more lease deals that have been almost non-existent that past couple of years.”

Gaps In Available Inventories?

So here we are. At the close of April, the industry had non-luxury vehicle inventory totaling 1.61 million vehicles, up from 1.60 million at the end of March, for a 52 days’ supply. The inventory of luxury vehicles stood at 291,520, about the same as at the end of March, but for a lower 52 days’ supply due to higher sales.

As you would expect, import non-luxury and luxury brands had the lowest inventories. The highest inventories were a mix of non-luxury domestic brands, dominated by Stellantis and a few popular luxury brands.

The big automakers had challenges: Non-luxury brands with the lowest inventory were Toyota, Kia and Honda, all with under 30 day’s supply, followed by Subaru, Hyundai and Volkswagen, all with below-industry average supply. Moreover, of the 30 best-sellers for the 30 days that ended April 24, Honda Civic had the lowest supply, followed by Honda CR-V, Kia Forte and Toyota Corolla. Honda posted particularly strong sales in April, drawing down its lean inventory.

Florida and California DMAs had the lowest supply while northern ones had the highest, but April marked an exception. Orlando had the lowest inventory at 45 days’ supply, followed by Los Angeles and Miami. Cleveland landed at the low end as well. Detroit had the highest at 59 days’ supply, followed by Houston and Seattle.

Lower price categories had the tightest supply by the end of April. The under $20,000 segment had an active supply of fewer than 3,000 units, a 26-day supply. New vehicles priced between $20,000 and $40,000 had days’ supply of 41 or less. The $40,000 to $50,000 category had a 50 days’ supply. The $50,000 to $80,000 category had days’ supply of more than 70. The over $80,000 segment had 55 days of supply.

April was strong, but it will pay to keep an eye on trends as we enter the summer months.

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