Mark Strand on LinkedIn: New vehicle supply is piling up, setting off some alarm bells. What's… | 12 comments (2024)

New vehicle supply is piling up, setting off some alarm bells. What's going on?A dive into the data shows us that the problem is not industry wide. So far it's relatively isolated to a few OEMs, though becoming severe for a couple. The big divergence is between the domestic manufacturers and everyone else. Most of the buildup in unsold units has accumulated with Ford Motor, Stellantis, and to a lesser degree GM. At the model level it is the pricey pickup and utility models that are stacking up: F-Series, Ram, Silverado, Sierra, Grand Cherokee, Wrangler etc. Rising MSRPs due to the upscaling of these models have been outstripping the incomes of the traditional buyer base since before the pandemic period and at current interest rates these vehicles have simply become unaffordable to many who were customers before 2021. Days supply for Stellantis, Ford and GM was, respectively, 38, 34 and 10 days ABOVE industry average in June according to data from Motor Intelligence. In contrast, product from the Asian OEMs, particularly Toyota and Honda, continues to sell briskly. Those manufacturers still produce affordable sedans and the most popular compact utilities, plus a raft of in-demand and relatively affordable hybrids. Days supply for Toyota Motor, American Honda, Hyundai Motor and Subaru of America in June stood at 28, 49, 50 and 33 days, respectively. All below industry average 55 days supply and in a historically healthy range. Nissan is the exception to the rule with the Asians at 56 days supply in June, one day above the overall industry.A lot of observers are expecting some strong incentives to "move the metal" later in the year. But given that the oversupply is concentrated in a limited set of brands and body styles we may not see blanket discounting. The best deals are likely to be found with domestic pickup trucks and utilities and close competitors, new and late model used.For context, it is worth noting that the Detroit domestics generally have always tended to overproduce and run days supply significantly above industry average. What's different this time is the extreme deviation of Stellantis and Ford Motor from historical range relative to industry average. Stellantis is going parabolic on excess units and has some tough decisions to make. Ford's situation is less extreme but still historically out of balance with demand. GM is in relatively decent shape by comparison, with excess supply trending down in recent months. For the rate at which excesses are stacking, both Ford and Stellantis are trying to hold on to margin to the bitter end. Stellantis incentive spend as % of their average transaction price is below industry average at 5.9% and Ford Motor is sitting at about industry average with incentives totaling 6.8% of ATP. Both brands thus have some room to run if they decide to bite the bullet and start putting money on the hood to attract buyers...

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