America’s new car dealers ended November with about 1.64 million cars in their inventory. As recently as July, they barely had 1 million in stock.
That’s news because of simple economics. Before prices can fall, supply needs to increase or demand needs to decrease.
Prices remain at record highs. But they can’t begin to fall until inventory and demand rebalance.
Days of Inventory – How Dealers Think
Car dealers measure their supply of new cars to sell in a metric they call “days of inventory” – how long it would take them to sell out at today’s sales rate if they couldn’t acquire more. That’s long been an abstract idea until a global microchip shortage limited the number of new cars automakers could build. Suddenly, dealers couldn’t acquire more of some of their most popular models.
An old industry rule of thumb told dealers to keep about a 60-day supply in inventory and another 15 days’ worth on order or in transit. Dealers in some areas might raise or lower that number slightly depending on local sales traffic. But industry wisdom meant few would fall far below it on purpose.
Those numbers, supposedly, meant that your local dealership almost certainly had a model with the combination of color and features that would appeal to you in easy reach.
Over the past year, some automakers have seen their average fall as low as seven days.
It has now recovered to something approaching normal. Dealers ended November with an average of 53 days’ supply of new cars on the lot.
Production Picking Up, Sales Slowing Down
“Timing is everything,” said Charlie Chesbrough, Cox Automotive’s senior economist. “Production is finally ramping up after being stymied by the chip shortage just as demand started to waiver and vehicle sales slowed down.”
Cox Automotive is the parent company of Kelley Blue Book.
While inventory is up substantially from recent levels, it remains low by historical standards. At the end of November 2020, supply stood at 2.77 million vehicles or 70 days’ supply. For pre-pandemic November 2019, supply hit 3.55 million vehicles, or 86 days’ supply.
Some Brands Have a Lot of Inventory; Some Little
Though the numbers are improving, the situation isn’t the same on every sales lot.
“A real dichotomy has emerged,” said Chesbrough. “Asian brands have super tight inventories while not so much for domestic brands. In 2023, we’ll be looking for heftier incentives to kick in for some brands and in some segments – particularly pickup trucks.”
As measured by days of supply, non-luxury brands with the lowest inventories – all below the national average – were Toyota, Kia, Honda, Subaru, Volkswagen, and Hyundai. Toyota and Kia had 26 days’ supply. That’s an improvement from earlier in the year, when days’ supply dropped to 20 and lower.
Luxury brands with the lowest inventories, below the national average, were Lexus, Land Rover, BMW, and Acura, in that order. Lexus has been the lowest for months, but even its supply has edged higher recently to 26 days’ supply.
At the opposite end of the spectrum were mostly domestic brands, some of which are reaching pre-pandemic inventory levels.
Among all brands, Buick had the highest inventory as measured by days’ supply at an astounding 121. It was followed by Jeep and Infiniti, also with triple-digit days’ supply. Dodge, Ram, Jaguar, Volvo, and Lincoln had 90 to 100 days’ supply – a glut even by pre-pandemic standards.
What Type You’re Shopping for Matters
Type of vehicle matters, as well.
Aside from low-volume high-performance cars, vehicles popular with middle-class Americans had the lowest supply, including compact, subcompact, and midsize cars, as well as minivans. All had less than 36 days’ supply. High prices and rising interest rates are squeezing mainstream Americans, and automakers continue to focus on expensive models that generate bigger profit margins.
Both large and expensive luxury cars had the highest inventory, along with domestic SUVs and pickup trucks. Full-size cars, of which there are not many offered anymore, had a whopping 93 days’ supply. Super luxury and luxury cars had more than 80 days of supply. Pickup trucks were at 77 days’ supply, which is not outsized since inventory typically is higher for trucks because they come in so many different configurations.
Some Top-Selling Models Still Easy To Find
Of the 30 highest-selling models in the 30 days that ended Nov. 28, 11 with the lowest inventories were Asian brands, specifically Kia, Toyota, Honda and Subaru. At the bottom were Kia Sportage, Toyota Corolla, Honda CR-V, and Toyota 4Runner, all with days’ supply below 22.
Of the 30 top-selling models, full-size domestic pickup trucks and SUVs had the most inventory, with Ram 1500 having the most at an outsized 118 days’ supply, followed by Ford Escape, with 105 days’ supply. The Chevrolet Silverado, Ford Explorer, and Ford F-150 fell in behind Ram 1500 and Ford Escape at 90 days’ supply or more.
As has been the case for months, the lower the price category, the tighter the supply. Under $20,000, days’ supply was a scant 21, even less than the month earlier. Between $20,000 and $30,000, days’ supply was up to 35. All other price categories had 45 days’ supply and higher.
