Economy cars, hybrids, suddenly hot small SUVs, sold out. But the supply of full-size trucks and SUVs is growing

It’s funny how it works when gas prices go up.

By Wolf Richter for WOLF STREET.

At the beginning of May, new vehicle inventories at dealerships increased again, but only by a hair’s breadth, still reaching only 1.13 million vehicles, according to estimates by Cox Automotive, based on its Dealertrack data, released last week. That was down 45% from a year ago and 71% from the old normal time, April 2019.

Since July last year, inventory has averaged 1.04 million vehicles. In contrast, in 2019, inventory averaged 3.66 million vehicles. You can see stocks improving, but they are extremely slow.

And there’s something else that’s popping up: Inventories are finally rising for full-size trucks and SUVs — gas hogs — while economy cars, hybrids and small SUVs are now the rarest and dealers are practically absent.

For potential buyers, this shortage of inventory is nil. Many have given up for now. Others have ordered vehicles and are patiently waiting months or months for them to be built. For the industry, these units ordered do not count as sales and only reflect future demand. They only count as sales when they are finally delivered to the customer.

Production in the United States and around the world continues to improve while remaining constrained by semiconductor shortages, which could now extend into 2023, and production shutdowns in China, where many components are manufactured. Additionally, European automakers are now grappling with shortages of cable harnesses produced in Ukraine.

Early last year, new vehicles began selling above the sticker, and it continues to this day. Manufacturers have reduced their incentives to dealers, and given the shortage of supply and lack of competition – given that dealers in general do not have enough inventory to sell – dealers have fled to even selling to savvy car buyers above the sticker, leading to the biggest jump in new-vehicle CPI data dating back to the 1950s.

With little supply, sales drop.

New vehicle sales in April fell 19% from April last year to 1.23 million vehicles, right in the middle of the range in the 1970s and 1980s.

This is not a sign of weak demand, but a sign of weak supply, since dealers had very little inventory to sell at the start of the month and still had little inventory to sell at the end of the month, and the potential buyers left empty-handed and frustrated, or stopped shopping altogether and decided to wait for the madness to pass, or ordered a vehicle with an uncertain delivery date:

Funny how it always works when gas prices go up: buyers suddenly want to save fuel.

Overall, the day supply of unsold new vehicles reached 36 days in early May, from 34 days in early April, according to Cox Automotive. In 2019, the average supply was 90 days.

Lowest bid.

The non-luxury segments with the lowest supply in early May are those with high fuel economy. And many dealerships are essentially short of these vehicles:

  1. Compact cars
  2. Hybrids
  3. Small SUVs
  4. Mid-size cars.

Among the 30 top-selling non-luxury models, the models with the lowest bid were those with high fuel economy. There are no more trucks on this list:

  1. Honda CR-V
  2. Subaru Crosstrek
  3. Honda Accord
  4. Kia Sportage
  5. Toyota Corolla.

It turns out there’s a demand for low-cost, fuel-efficient cars like the Honda Accord and Toyota Corolla. American automakers largely threw in the towel on sedans, which was a silly move to please Wall Street. And consumers looking for fuel-efficient sedans can choose from imported brands. Toyota was already delighted in March.

The non-luxury brands with the lowest supply, in part because they still make sedans, were all imported:

Luxury brands with the lowest supply included:

  • Porsche
  • land rover
  • Lexus.

Above-average offering…here are the full-size trucks and SUVs.

Among the 30 best-selling models, the offer of energy guzzlers is now above average:

  • Full-Size Domestic Pickups: Ram 1500, Chevrolet Silverado and Silverado HD
  • Full-size domestic SUVs, like the Ford Explorer.

Top brands with the highest bid include:

  • To dodge
  • RAM
  • Chrysler
  • Jeep
  • Audi
  • VOLVO
  • lincoln
  • Buick

Dealerships aren’t short on everything.

Overall inventory is terribly low, and overall supply is terribly low, and dealers are basically running out of certain models. But with other models, they are starting to build up stocks. And some brands have had a lot of supply.

Some brands have a supply in the 60 day range or longer which would be considered normal, such as Alfa Romeo, Volvo, Chrysler, Fiat, Buick, Jeep, Dodge, Ram and Audi. But just because there’s supply doesn’t mean Americans are going to flock in and buy it.

On the other hand, Kia, Toyota, which was No. 1 in new vehicle sales in the first quarter, and Honda have a supply of around 20 days.

As for electric vehicles, traditional automakers are now producing some models, but production is still low and waiting lists for an electric vehicle are long. Tesla raised prices in the United States amid strong demand. But Tesla doesn’t have dealerships, so there’s no “supply” data because supply is measured at dealerships. EV makers face similar chip shortages with their EVs they face with their other models, production remains handicapped and unsold inventory, and therefore supply, of EVs will continue to be close to zero for a while.

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