Auto Service World
News   February 8, 2023   by Adam Malik

Why new vehicle sales rebound may be delayed

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Changes to personal financial situations led by economic challenges and inflation may delay offset pent-up demand for new vehicles, according to an industry observer.

“It has caused the demand to be destroyed completely, we don’t expect now that we’re going to have that whip effect where we come back over the line, recover some of those lost sales,” said Todd Campau, automotive aftermarket practice lead at S&P Global Mobility.

What was once classified as a supply constraint may now instead be a demand constraint as people re-evaluate their financial situation.

“So those sales are essentially lost for now,” Campau said of new vehicle sales in the next year or so.

You may notice more vehicles in dealer parking lots these days as you drive by.

“They’re starting to get out of that point of where they were selling every vehicle that they were getting,” he said at AAPEX 2022 during his 5 Trends impacting the North American Aftermarket presentation.

“For a while [in] their dealerships, every vehicle that’s coming in on the truck already was assigned to a buyer. They’re starting to get out of that. We’re starting to see the restock at the dealer at last begin.”

This is good news for the automotive aftermarket. If new vehicle costs are too high, widening the gap between the ‘repair or replace’ debate, consumers will most likely opt to keep their older vehicle and have it serviced by the aftermarket to keep it on the road.

Average vehicle cost is also playing a role in softening demand. In the U.S., the average vehicle costs almost $50000, according to Kelley Blue Book. With a smaller pool of chips available, automakers are diverting supply to higher-end vehicles, which is driving up costs to the consumer, Campau reported. There has also been increased demand for higher-priced electric vehicles, which average more than US60,000.

“I don’t think that’s sustainable,” Campau observed. “I think the average price of a new vehicle is going to have to come down. But it’s not going to come down until it has to. The manufacturers will continue to make money while the making’s good. And so they’re going to continue to use those vehicles that are selling.”

Demand will drive prices down but not to pre-pandemic levels where the average cost in the U.S. was $33,000, he added.

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