This is what happens when there’s little supply and plenty of demand
By Gary S. Vasilash
Back in November 2020, the Centers for Disease Control determined, “The overall weekly hospitalization rate is at its highest point since the beginning of the pandemic, with steep increases in adults aged 65 years and older. Based on death certificate data, the percentage of deaths attributed to PIC for week 48 was 12.8% and, while declining compared with week 47 (18.6%), remains above the epidemic threshold.”
In other words, horrible times.
As we come forward to now, here is something that seems nearly inexplicable: J.D. Power and LMC Automotive estimate that new-vehicle retail sales in November 2021 will be 12.6% lower than they were in November 2020.
Thomas King, president of the data and analytics division of J.D. Power, explains, “For November—as has been the case since August—new-vehicle sales are being constrained by available inventory.”
Less to buy.
King continues, “Retailers continue to sell a large proportion of vehicles almost as soon as they arrive in inventory. This November, a record of nearly 55% of vehicles will be sold within 10 days of arriving at a dealership, while the average number of days a new vehicle sits on a dealer lot before being sold is on pace to fall to 19 days, a record low and down from 48 days a year ago.”
Think about that. A year ago vehicles were on lots for nearly 30 days longer than they are now.
And the people on the short end of the proverbial stick are customers. The research firms estimate that average transaction prices—the prices actually paid by people—will be $44,043, which is 18.1% higher than they were in November 2020.
As a result, the total retail profit per vehicle will hit a record $5,164, which is up $3,060 last year.
$5,164 now. $2,104 then.
And then there’s this:
Two years ago, November 2019, COVID wasn’t even on the radar of most people.
Yet the J.D.P.A. and LMC estimate that the total aggregate profit from new-vehicle sales in November 2021 will be 226% higher than in November 2019.
Keep that in mind when you visit the nearly empty lot of your local dealer. You might think they’re hurting. But that may not be the case.