Reduce the price and they will come: New vehicle sales are rising thanks to big discounts and incentives as inventory explodes

But prices are still way too high and automakers aren’t lowering them nearly enough.

By Wolf Richter for WOLF STREET.

Total November new vehicle sales — retail and fleet deliveries from dealers and automakers to end users — rose 10% year-over-year to 1.40 million vehicles, with an additional day of sales this November, Bureau of Economic Analyst data showed today.

JD Power estimates retail sales of new vehicles – excluding sales to fleets, such as rental fleets – also rose 10% year over year to 1.15 million units.

The seasonally adjusted annual sales rate for retail and fleet units, which takes into account seasonal fluctuations and the additional sales day in November, rose 6.7% year over year to an annual rate of 16.5 million vehicles, the highest level since May 2021, when the collapse occurred New car inventories were in full swing amid the semiconductor shortage, causing dealers to run out of vehicles to sell, sales to plummet, prices to skyrocket, and the appearance of hideousness was widespread addendum sticker. Inventories have now more than doubled and it is time for price cuts.

Sales have gained momentum in the past two months as automakers rolled out big incentives and discounts and dealers made deals on models they were heavily overstocked on. Inventories have risen sharply this year because prices are too high after the price surge during the pandemic. But some models remain in short supply.

With today’s sales figures, our forecast for total sales in 2024 increases to 15.93 million vehicles, the highest figure since 2019 and only slightly below the figure for 1986, almost 30 years ago.

The ugly long-term reality is that new vehicle sales, as measured by the number of units sold, have been a zero-growth business punctuated by deep declines for 25 years. Only price increases and the shift of models to the higher price range have driven up the overall US dollar revenues of automobile manufacturers. So this applies to the entire US market.

But there are exceptions, like Tesla and Hyundai-Kia, whose sales have risen from record to record, eating up market share from other automakers whose sales have plummeted (our volume charts by automaker through 2023; update for 2024 to follow in a month).

Prices that were too high resulted in volumes being reduced in good times and collapsing in bad times.

New car inventory According to Cox Automotive, the number of vehicles on dealer lots and in transit rose to 3.04 million vehicles in early November, the highest level since May 2020. Supply increased to 85 days in early November, with 60 days considered healthy.

Stimulus spending by automakers in November rose 43% year-over-year to an average of $3,291 per vehicle sold, which JD Power estimates represents 6.5% of MSRP. Leasing accounted for some of the stimulus spending. JD Power estimates that leasing accounted for 23% of retail sales in November.

Incentives may be increased as inventories continue to pile up. In 2019, stimulus spending reached 10% of RRP.

Ford, for example, today reported a 14% year-over-year sales increase in November. Sales of battery electric vehicles increased 20% year over year. Ford advertises aggressive lease payments, 0% financing on some models, cash refunds on some models, etc. And Ford dealers offer steep discounts.

In a sign of things to come, Ford also lowered the MSRP of its 2025 F-Series model just entering production, with the base F-150 XLT receiving a $2,025 lower MSRP than the 2024 model year, a reduction of $4 .3% represents MSRP, which has never been seen in the history of our famous F-150 XLT and Camry LE price index since 1990.

Even Stellantis is suffering from a tendency to overprice, following a revolt from traders over its pricing policies and mismanagement. Incentives and discounts started flowing. And a few days ago, CEO Carlos Tavares was forced out of the company. Ram and Jeep dealers, after being choked by overpriced inventory, made some headway with big incentives and discounts, and in the last two months supply has fallen from astronomical levels.

“Gradual improvements in the availability of more affordable vehicles are expected to maintain new vehicle sales momentum, while transaction prices and profitability are expected to moderate slightly,” JD Power noted.

And we’ve seen that in the CPI for new vehicles, which has come down very slowly and reluctantly over the last two years after rising. But it remained surprisingly sticky (unlike used car prices, which collapsed).

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