Auto Service World
News   February 7, 2024   by Adam Malik

New inventory is growing but why isn’t it the right inventory?

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New vehicle inventory is normalizing at dealerships — but it doesn’t appear to be the right kind of inventory that will help sales numbers rebound to pre-pandemic levels.

While greater chip capacity is allowing for the normalization of vehicle inventory, Guido Vildozo, senior manager of light vehicle sales forecasting for the Americas at S&P Global, cautioned that it’s not necessarily the type of vehicles customers want.

“When we’re talking about a normalizing of inventory, we have to clarify: This is not the inventory we had in 2019,” he said at Canadian Black Book’s Talk Auto conference event near Toronto in the fall.

Take a look at what’s been sold over the last two years, he told attendees. Automakers, with fewer resources, put those into vehicles that would get them the biggest return on investment — those bigger, more expensive vehicles.

“We were focused on that Wrangler Gladiator Ultimate Package because we thought the zombie attack was going to come in right after COVID. That’s the kind of inventory we have right now. It’s not the stuff that is reasonable to most consumers; it’s not the kind of stuff that is affordable to most consumers,” Vildozo said.

“So yes, inventories from a larger picture perspective are starting to normalize … but it doesn’t mean that it’s the right product.”

DesRosiers reported that the 2023 third quarter saw average transaction price for a light vehicle hit nearly $53,000, up almost 6 per cent from the end of 2022.

At AAPEX 2023 in Las Vegas, Todd Campau, aftermarket practice leader at S&P Global Mobility, told his audience that high prices from automakers aren’t likely to be sustained.

“The past few years, I’ve been telling you that I don’t know if [high prices are] sustainable. And I’m still not sure it’s sustainable,” he said.

Prices are not sustainable because, as Vildozo noted, the right products aren’t available to consumers. The right products are those that are more affordably priced.

“When we’re talking about the right product [that is] anything priced below $40,000,” Vildozo said.

Those vehicles also have quick turnarounds. They’re on the truck, delivered and sold in about 12 days in North America.

“And that is the largest transformation we’re going to have, particularly as we’re navigating this landscape of high interest rates and low economic momentum,” Vildozo said. “We’re short on those vehicles. And that will continue to be a challenge — getting those vehicles out to consumers.”

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