Brand new Nissan cars go on sale in Richmond, California, on July 9, 2021. Auto prices have skyrocketed during the pandemic and, although down from their peaks, are still higher than several years ago. before.
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Brand new Nissan cars go on sale in Richmond, California, on July 9, 2021. Auto prices have skyrocketed during the pandemic and, although down from their peaks, are still higher than several years ago. before.
Photos Justin Sullivan/Getty
It’s been almost three years since auto factories around the world began closing because of the pandemic.
However, amid the pandemic, severe semiconductor shortages and other supply chain difficulties, vehicle manufacturing has never really returned to normal.
And the price? Hoo boy.
Both new and used prices have stopped skyrocketing. In fact, both fell slightly in February.
But the average new car transaction price is still $48,763, according to Kelley Blue Book. Before the pandemic, the average new car sold for $37,876.
At an auto show this year, Noah and India Grabisch in Laurel, Md., were reviewing new SUVs they liked. But an $86,000 price tag for a Chevrolet Suburban?
Good …
“It looks nice,” said India Grabisch. “But not.”
The used car market hasn’t brought much relief either. The average retail used car price today is $26,510.
And after falling last year, closely watched wholesale prices, a key indicator of where the market is headed, are actually moving. rise again.
Why are prices still high? Here are a few reasons.
A Chevrolet Suburban is for sale at a dealership in Glendale, California, on August 4, 2021. Prices for more expensive cars have risen even higher since the pandemic.
Mario Tama / Getty Images
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A Chevrolet Suburban is for sale at a dealership in Glendale, California, on August 4, 2021. Prices for more expensive cars have risen even higher since the pandemic.
Mario Tama / Getty Images
Supply chain crisis still reverberates
The semiconductor shortage has gotten much better since 2021, but it hasn’t completely disappeared, and other supply chain problems continue to periodically disrupt output.
Because of these supply chain problems, the global auto industry has produced millions less vehicles than it could have.
The delivery of new vehicles is starting to improve, but those millions of “missing” vehicles are still disappearing. Lower supply, higher prices: That’s the underlying economy.
What cars are being produced? Not the cheap kind
When automakers can’t produce as many vehicles as they want, they prioritize the cars that are most profitable for them. The cheap ones get to boot.
Consider what happened at Nissan, which continues to grapple with supply chain challenges throughout 2022. In response, it cut production by 78 percent of one of its cheapest cars. me, Nissan Versa. Nissan also reduced sales of two other low-cost models, Sentra and Kicks.
Bigger, slightly more expensive vehicles, like the Altima and Pathfinder? NISSAN increase production of people.
It’s not down to a lack of buyers in the low-end segment, said Judy Wheeler, vice president of sales and regional operations for Nissan USA.
“Over the last month, we’ve seen an increase in searches for Nissan Versa, Sentra and Kicks, showing that consumers are increasingly interested in this segment,” she told NPR via email.
She said Nissan intends to produce more of these entry-level vehicles as the supply chain allows.
It’s not just Nissan. Broadly, automakers have focused on larger, more luxurious, more expensive cars. And the ones they make also tend to be packed with extras that drive the price even higher.
Fewer cars – and higher prices – very profitable
The shift in the market is noticeable and automakers are in no hurry to reverse course.
Consider how big the change has been. Car Cox crush the numbers and found that from December 2017 to December 2022, new car sales under $25,000 – affordable, by new car standards – fell 78% and up from nearly 13% of total sales. New car sales dropped to less than 4%.
Meanwhile, new car sales over $60,000 spiked. Those cars, which cost more than the average American’s annual income, grew from 8% of the auto market to 25% of sales.
Because those $60,000 cars are significantly more profitable than the $25,000 cars, this shift is very, very lucrative for car companies. And they’re particularly focused on lucrative returns, rather than large volumes, as they’re investing heavily in new electric vehicles (EVs).
“The valuation environment we’re in right now is very good, very strong,” General Motors chief financial officer Paul Jacobson told investors during an earnings call last year. “And … running the business for cash flow is critical to helping fund our electric vehicle transition.”
How long can the price stay at this high? The Ram TRX, shown at the Chicago Auto Show in February, starts at $86,450.
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How long can the price stay at this high? The Ram TRX, shown at the Chicago Auto Show in February, starts at $86,450.
Scott Olson/Getty photo
Yesterday’s new cars are today’s used cars…
Three years ago, when production lines began to slow down, it had an immediate impact on both the new and used car markets. Fewer new cars cause new prices to go up. That has pushed many shoppers into the used car market. And more shoppers in the used market also push prices up.
But the new car troubles also have a slowing effect on the used car market – because new cars obviously become old cars after a while.
So all the top cars have made in 2021 now some very beautiful cars are two years old, which means that even in the used market, the premium market is booming.
Meanwhile, as automakers cut production of low-priced, no-frills sedans, people seek out cheaper cars. late model used car is now out of luck.
Jonathan Smoke, chief economist at Cox Automotive, said: “We’re pretty sure the used car market is extremely tight and that’s a direct result of what’s happened over the past three years.
Lonnie Smith, president of the nonprofit On the Road Lending, which works to help working families get affordable loans to buy used cars, preferably ones that are still under warranty. onion.
“Typically, we’re looking for vehicles that are two to four years old, less than 60,000 miles old — a modest category of vehicles,” he said.
Lately, those have become so hard to find that On the Road has been licensed as an auto dealer so it can buy cars at auction – a handful of cars that fit the bill on dealer lots have been approved. grab it immediately.
And the average loan for those cars, which ten years ago was $13,000, has now grown to $24,000.
Because, that’s just the price of a modest used car in America today.
The electric Hyundai Ioniq 5, reportedly driving inside a convention center at the 2022 New York International Auto Show, starts at around $40,000. Automakers are working to lower the price of electric vehicles, which currently cost an average of $58,385. But in the meantime, they’re not making as many cheap gasoline-powered cars as they used to.
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The electric Hyundai Ioniq 5, reportedly driving inside a convention center at the 2022 New York International Auto Show, starts at around $40,000. Automakers are working to lower the price of electric vehicles, which currently cost an average of $58,385. But in the meantime, they’re not making as many cheap gasoline-powered cars as they used to.
Timothy A. Clary/AFP via Getty Images
But there is some hope: EV prices could fall
As chip shortages ease, automakers say they want to produce more vehicles for people who can’t afford flagship full-size SUVs. But don’t expect a tsunami with $15,000 cars.
“You know, we don’t really expect to see a resurgence in inexpensive gasoline-powered vehicles,” said Ed Kim, head of analytics at AutoPacific. “Really, the industry is working very hard to get more affordable plug-in cars on the market.”
In fact, led by Tesla drastically reduced priceselectric car price To be fall. According to Kelley Blue Book’s latest data, they’re down 7.5% year over year, and that’s before federal tax credits (including used cars).
But there are tough challenges — especially around charging infrastructure — before many car buyers buy electric vehicles. And prices have a long way to go before they’re truly affordable. Investors have recently disappointed when Tesla, which has long promised a cheaper car, didn’t reveal one.
So cheaper vehicles are on the way. But many of them will run on batteries, and they will take a long time to get here.
