Posts by Kevin Roberts
This month, CarGurus Director of Industry Analytics Kevin Roberts dives into the latest industry trends from April 2022. Take a look at his key takeaways below or download the April edition of the CarGurus Intelligence Report.
After a disruptive February, the automotive environment continued its dynamism in March as a delayed tax season finally started to increase consumer demand, impacting inventory and prices. Additionally, ongoing supply chain challenges continued to impact the outlook for a “return to normal,” with expectations now shifting to Q4 from Q3 for full production to return.
While 2022 had been pegged as a pivot point, so far, we’re seeing more of the same. Continued plant shutdowns due to familiar narratives like chip shortages or new ones like cyber threats continue to impact new vehicle production. Beyond production, we also saw issues with the transportation of vehicles, from a cargo ship fire to blockades at bridges, all of which impact new inventory levels and continue to slow the trajectory towards a new normal. With those speed bumps all in just one month, it’s not surprising that we didn’t see much change in new inventory in February.
So far, 2022 has felt like déjà vu – instead of a hopeful new start, we’re instead seeing several familiar refrains from 2021. Thankfully, though, we appear to be at an inflection point in a journey to a ‘new normal’ versus backsliding into further disruption of 2021.
New inventory levels declined slightly in January by 5%, although month-end and weekly seasonality trends had a strong part in that decline, as the inventory index reading was flat with December just a couple of days prior. With how threadbare new inventory has become, month-over-month variances have become a bit sensitive – however, the year-over-year numbers still show new inventory down nearly 70%. Conversely, used inventory continued to see improvement in January and is now down just 0.8% compared to last year. The recovery in used inventory volumes is one reason we saw a recovery in 2021 used sales, while new sales volumes continue to be impacted.
Of course a year of surprises would end with even more. Sales for the full year came in at the lower end of our estimated range with an annual total of 14.9m. A glass-half-full view would say that’s a further recovery from last year’s level of 14.5m and still, a lot of metal moved. The glass half empty would look at the lost sales due to missing inventory and remain wistful for annual sales that likely would have surpassed 17m.
Where things get really surprising is that new inventory actually increased in December to a 5-month high, with the CarGurus New Vehicle Availability Index increasing by 17.9% in December. So how did sales slightly underperform while inventory increased? We’re likely starting to see a situation where the mix of inventory is becoming as important as just having a vehicle— both for vehicle body type and price (more on that in a bit). Not to be forgotten, the used index also increased 9.8%, and since used sales have seen a full recovery, we’re likely seeing more of a normal seasonal decline, which is driving the inventory increase we see in December. While monthly inventory gains are great, new inventory is still down 68.7% compared to last year, and used inventory is in a significantly better position with index levels down only 6.7% from last year.
As we wrap up a historic year, I’ve put together a review of 2021 and a look ahead to 2022 and beyond:
2021 Industry Review
- Supply chain disruption – What started as a shortage of semiconductors has become an everything shortage, leading to further disruption in automotive production.
- Demand remains high – Consumers continue to have high demand for private mobility, which combined with supply issues, is leading to historically high prices.
- Used recovery – While much of the focus has remained on new vehicles, the story with used is one of a near-full recovery in registrations. Used inventory has also remained more resilient than new.
- Return of inflation – Consumers are battling inflation on many fronts, perhaps most notably in vehicle prices, where new and used levels continue to reach historic highs.
Up until Thanksgiving, it looked like we’d be talking about another month of inventory growth in November. However, it appears that sales demand was high over the extended holiday weekend – before Thanksgiving, the new availability index went from up 4.6% compared to October, and after the holiday, it went down 4.9% to close out the month. Used saw a similar, but smaller, late-month shift, with inventory going from up 2.2% to down 1.4% over the holiday weekend.
After nine consecutive months of declines which saw index values deteriorate over 72%, it appears that we may have finally reached a bottom for new vehicle inventory with the Vehicle Availability Index increasing by 1.1% in October (albeit down 71.1% compared to inventory levels last year).
What caused this nascent turnaround? A combination of reduced sales demand due to a lack of vehicles – not a decline in true consumer demand and increased production of vehicles at a relative level as the semiconductor shortage starts to mitigate.
The unrelenting inventory maelstrom continued to spin in September as persistent production delays coupled with resilient consumer demand further impacted vehicle availably across the board.
We saw yet another decline for the new Vehicle Availability Index in September, with a reading of 20.8, a decline of 10.9% compared to August and down 69.1% YoY. The continued reduction in new inventory is pulling down sales and causing a cutback in full year forecasts for both 2021 and 2022. One silver lining is the strong demand for consumers for new vehicles, evidenced by their willingness to pay historically high prices with reduced incentives and financing. However, this comes as a double-edged sword, as high demand might continue to keep new inventory levels low as production slowly comes back.
In the August edition of the CarGurus Vehicle Availability Index & Insights Report, Director of Industry Insights & Analytics Kevin Roberts provides a glimpse at the latest trends impacting inventory and pricing, which he’ll dive into in-depth at Navigate.
August had been pegged as a potential turning point for the ongoing inventory shortage – however, as has been quite common on this journey, the expectation was accurate but not in the ways that were anticipated.
For what feels like the umpteenth time, new inventory levels dropped further with the new Vehicle Availability Index reading for August coming in at 23.3, a drop of 13.4% from July and down over 64% from last year. There was hope that August could become an inflection point – however, we continued to see further plant shutdowns due to a lack of silicon, and now the prospects for new sales for the rest of the year continue to dim with the reality that tight inventory will last well into 2022.