Is the Automobile Bubble Bursting?

[explanade]

Actually, isn't it Congress which can force the unions to take a contract that they haven't ratified?

Some unions rejected the latest contract proposal because it didn't offer enough schedule flexibility, leafing to stress and quality of life issues.

 

[freedom2022]

Then again, perhaps manufacturers will conspire to reduce supply. They keep saying they will. But will they? When the cars don't sell, will they be tempted to push them to dealers with back room incentives? That's been the story for the last 100 years, and one reason forced constrained supply (like the OPEC cartel) has never stuck.


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The manufacturers need production volume to make profit. Car dealers as well.

 

[JoeWras]

Revisiting.

Bursting? No. Deflating? Absolutely, especially in the truck segment.

I've been looking at local inventories. Certain Subaru models continue to stock up. Chevy models are definitely landing and staying on local dealer lots. Honda and Toyota? Fuggetaboutit.

"It depends." This is progress. 15 months ago people were buying anything, literally. Used car prices are sagging, and maybe even accelerating the sag.

I thought this article was interesting. It has some nice graphs by brand. Good time to buy a Buick, ha ha. The author points out that fuel efficiency has a lot to do with the shortages now. And the first commenter called out the executives that are running the American companies who have now 100% abandoned the sedan segment. I can't disagree. It is a damn shame.

https://wolfstreet.com/2022/12/14/r...ly-to-fuel-efficient-cars-very-little-supply/

So on an aggregate basis, supply is still low but is starting to return to healthy levels. The problem now is that across some brands and models, there is nearly no supply, and across other brands and models, particularly US brands and large vehicles, there is oversupply.

 

[MichealKnight]

Debatable

The manufacturers need production volume to make profit. Car dealers as well.

OEM's, - yes. Each time they invoice a car to a dealer - bam, they made their margin. Mind you - if they over-do it, then they have to come to the party with floor-plan subsidies (reimbursing dealer inventory carrying costs....) and incentives/rebates. But overall, yes - more production is more net for the OEM.

Dealers? The Return on Sales ( true net profit) has NEVER been better. Low stocks, limited availability as made grosses (gross profit per vehicle) at RECORD levels for dealers. They finally got to be Tesla "showrooms" where the people go in, and feel so good about paying full sticker price. The franchised dealers have enjoyed that for 2 years now. Of course, big profits at big corporations are celebrated as "earnings!" - so put aside the thought of Jones Motors making money.... look at publicly traded dealership groups - Lithia, AutoNation just as 2 examples- their gross and net has been marvelous and along with their "streamlining the buying process" and "transparency" - they make MORE per customer than Jones Motors does.

So when production returns to normal - dealer net per car will be less. This was a golden age.

It might have served as a catalyst to where OEMs and dealers might get together and do Tesla "Full Price is a fair price" model. BUT - -- those endeavors usually fizzle because the Manufacturer still wants marketshare - and they love using stair-step sales programs that cause HUGE pricing games and irregularities in the marketplace.

 

[JoeWras]

GM tried the MSRP thing with Saturn. It cracked, then they ejected the brand. Granted, they screwed up other things there too.

 

[explanade]

Maybe one sign is Carvana.

The 53-week high is just under $246.

It's currently $5 or almost a 98% drop this year.

maybe when used car prices were crazy, they were doing well.

But apparently their business model was to transport cars from anywhere in the country for a flat fee.

Dumb, people were paying the same fee to have a car transported across the continent for the same fee as transporting it from a city 20 miles away?

 

[Fermion]

Bought a new 2018 Ford transit 250 van for $31.5k, sold it for $32k in Nov 2022 with 27,000 miles on it to CarMax, who polished the wheels and sold it a week later for $44k.

I think the bubble is just fine.

 

[Sunset]

Maybe one sign is Carvana.

The 53-week high is just under $246.

It's currently $5 or almost a 98% drop this year.

maybe when used car prices were crazy, they were doing well.

But apparently their business model was to transport cars from anywhere in the country for a flat fee.

Dumb, people were paying the same fee to have a car transported across the continent for the same fee as transporting it from a city 20 miles away?

Carvana has had other big issues. In IL they had their business State license suspended for failing to deliver the title to purchasers, among other things. It according to news was suspended twice...
Seems NC has not been happy either they way they did business and restricted what it can do.

 

[CaptTom]

Oooo, I hope that article is right. I'd love a new truck, but with the prices I've seen over this past year, I lost interest.

 

[JoeWras]

Oooo, I hope that article is right. I'd love a new truck, but with the prices I've seen over this past year, I lost interest.

The manufacturers have not dropped MSRP, and they won't. Chevy has $1500 incentive on the Silverado. Still too expensive. They're gonna have to do better.

Ford has raised the MSRP of the Lightning F-150 by 40% in one year. And we're all supposed to go EV with that kind of gouging?

 

[38Chevy454]

The manufacturers have not dropped MSRP, and they won't. Chevy has $1500 incentive on the Silverado. Still too expensive. They're gonna have to do better.

Ford has raised the MSRP of the Lightning F-150 by 40% in one year. And we're all supposed to go EV with that kind of gouging?

The Silverado incentive is for the turbo 4 cyl engine, that few people actually want.

 

[NW-Bound]

Ford has raised the MSRP of the Lightning F-150 by 40% in one year. And we're all supposed to go EV with that kind of gouging?

I dunno if it is gouging. We don't know how much their production cost is, and how much it has risen since they first promised the price.

Tesla said $40K when its Cybertruck was introduced in 2019. I have not heard what its actual price is going to be.

 

[GaryInCO]

kbb.com still says the base model will be $39k, but I seriously doubt it. The world has changed a LOT since the Cybertruck was announced in 2019. In 2021 and 2022 Tesla bumped the price of the 3 and Y many times -- partly because they could (lots of people waiting in line, and a lot of them weren't real price-sensitive), partly because the "actual cost to manufacture by the time we actually deliver this car" was a moving target. When there's a 12-month wait list, and market disruptions like a pandemic and a war, Tesla has to guess what the car will cost to built in a year.

That's true in spades for the Cybertruck. Supposedly Tesla has well over a million reservations for it. If only half of them are serious, that's still enough to keep the Austin factory busy for a looong time.

 

[NW-Bound]

The price of the Cybertruck cannot be too far from the Rivian truck. I say this as an ignoramus about automobile manufacturing.

 

[RetiredAt49]

Just saw a Rivian truck for the first time today…. It’s the most stupid looking thing I’ve seen in my life! Worse than a Nissan Qube.

 

[JoeWras]

I dunno if it is gouging. We don't know how much their production cost is, and how much it has risen since they first promised the price.

Tesla said $40K when its Cybertruck was introduced in 2019. I have not heard what its actual price is going to be.

OK, "gouging" is perhaps a poor word. Ford says much of the price rise is due to price rise in components. Maybe they are being gouged.

The problem is this is being forced on us by the government, primarily with California leading the way.

We all don't work in CA and get tech RSU money or performance royalty checks to pay for this.

The F-150 started at $40k and now is $56k. Do you think Tesla will stay at $40k?

And when did $40k become affordable? Hello? One can by a Chevy Malibu for $27k. Get 'em while they got 'em because GM won't be building cars soon.

 

[NW-Bound]

^^^ It's always tough for people who don't have money.

I guess that if it is desirable to have more people driving EV and domestic car makers cannot or do not want to make inexpensive EVs, the government will have to allow import of Chinese EVs without tariffs.

Or people with less money can wait to buy used EVs which will be depreciated way below the new price. These used EVs will have a reduced range, but when you don't have money, well, you will have to accept less.

PS. A quick look on the Web revealed several articles by prominent media sources on the Chinese automakers ramping up export to outside China. I can only read the articles' title and the intro, as they are behind a paywall.

 

[freedomatlast]

I believe the tide is finally starting to turn. Most dealers are still making the potential buyer feel like they're doing them a huge favor by not asking above MSRP, and they're still dealers out there thinking that potential buyers are not going to just walk away when they try to add an additional $800 for wheel locks, cheap after market floor mats and cheap aftermarket mud flaps mounted way too high to do any good.

I've been looking on and off for a couple of years. Maybe it's the time of the year or maybe the economy is starting to cool off a little bit, but I was finally able to make a deal on a '22 Honda Passport Elite for $3800 off MSRP and 2.9% APR financing. Not great by historical standards but ok in todays world. I found one dealer about 50 miles away that had the right vehicle and didn't waste my time playing games or trying to add on ridiculous fees or ADM's.

 

[JoeWras]

I believe the tide is finally starting to turn. I've been looking on and off for a couple of years and was finally able to make a deal on a '22 Honda Passport Elite for $3800 off MSRP and 2.9% APR financing. Most dealers are still making the potential buyer feel like they're doing them a huge favor by not asking above MSRP, but I found one dealer about 50 miles away that had the right vehicle and didn't waste my time playing games.

Nice.

Don't expect the dealers and manufacturers to ring a bell and start telling the world they are dealing again. They'll do everything they can to make the shortages and non-negotiable prices look permanent.

We've got older cars and I don't want to be in a bind where we have to deal. I would prefer to just walk if we can't come to terms. So that's why I'm monitoring and potentially looking this upcoming year.

I remember reading earlier this year (can't remember where) that one dealer told a potential buyer they were on their permanent "s-list" because they walked (probably in a huff) when the dealer wouldn't deal. I really hope that kind of behavior comes back to take a chunk out of that dealer's [-]butt[/-] behind. I'm on my way to church, I need to watch my language.

 

[Fermion]

Hopefully they will encounter the same pain the wood product manufacturers have/had with their osb and plywood now having dropped by 80% from the peak prices.

 

[Venturer]

My SNL is still waiting for his 2022 F350 Duelly to be delivered. Last week he got notice that it "might" be availible in Feb. His current 2018 F250 is still in good shape with low mileage but he wanted a new duelly. Thhe thing that gets me is that he going to be paying a premium price for a 2022 when the 2023 is already out and being delivered. It is crazy but it's his money so I keep my mouth shut. No way would I do what he is without getting a very substantial discount, since the market is cooling down daily.

 

[Lakedog]

Had been looking at Toyota Tacomas for sometime and finally bought one a few days ago. Most dealers near me are still asking well above MSRP and will not even consider ordering one with the options you want (or don't want in my case). Finally found a dealer that would sell at MSRP and adjust the options on a 2023 Tacoma (4WD, V6 double cab) that was already on order but not yet built. Checked five other dealers -- all still asking $2000 to $6000 over MSRP so felt like a small win (to pay MSRP) even though I had never paid anywhere close to MSRP in the past.

Would have continued waiting them out on pricing but needed a new vehicle. I was satisfied to get a truck without many of the pricey but low value (to me) options most dealers include to run the cost up several $1000.

 

[JoeWras]

Had been looking at Toyota Tacomas for sometime and finally bought one a few days ago. Most dealers near me are still asking well above MSRP and will not even consider ordering one with the options you want (or don't want in my case). Finally found a dealer that would sell at MSRP and adjust the options on a 2023 Tacoma (4WD, V6 double cab) that was already on order but not yet built. Checked five other dealers -- all still asking $2000 to $6000 over MSRP so felt like a small win (to pay MSRP) even though I had never paid anywhere close to MSRP in the past.

Would have continued waiting them out on pricing but needed a new vehicle. I was satisfied to get a truck without many of the pricey but low value (to me) options most dealers include to run the cost up several $1000.

That's progress. Especially for anything Toyota.

 

[Major Tom]

Just saw a Rivian truck for the first time today…. It’s the most stupid looking thing I’ve seen in my life! Worse than a Nissan Qube.

I saw one a few days ago, for the first time. The only reason I recognized it was because of the documentary "Long Way Up", in which actor pals Ewan McGregor and Charley Boorman ride from Patagonia to Los Angeles on electric motorcycles. Their backup team drove Rivian trucks. I was riding the bus in Oakland, and saw a familiar shape parked by the roadside. "That looks like a Rivian truck!" I said to myself. As we passed it, I saw that indeed it was. As for the appearance, although I've only taken cursory looks at them, they just strike me as plainer looking than your average IC vehicle. Some of this, I imagine, is dictated by the technology. For instance, EV's don't need big honkin' radiator grills. Either way, Rivians don't look anywhere near as outlandish as the prototype cyber trucks.

I have nothing to add to the EV discussion that has happened in other threads but, if considering a vehicle purchase, I'd go for IC or hybrid. Nevertheless, it's fun to watch the development of EV's. I'd consider an electric bike though! Just not any vehicle that relies on electricity alone, until the charging infrastructure is far more developed and widespread.

Oh, sorry. Y'all were talking about price bubbles. Carry on, carry on.

 

[JoeWras]

Oh, sorry. Y'all were talking about price bubbles. Carry on, carry on.

Well although we may have derailed a bit on EVs, the situation is germane to the current ICE car supply crisis.

It has a lot to do with corporate resources. It's pretty clear that all the manufacturers have poured massive resources into EV design, manufacturing startup, purchasing, etc.

In a perfect world, management would manage both. Having spent my last 15 years at Megacorp on "legacy" products, as they are called, I can assure you they cut your resources to the bone. This causes all aspects of the product to be fragile, from development to shipping. External shocks are hard to manage without the proper resources that are focused elsewhere.