The automotive industry may be in for some more turbulent times ahead. Reports from Cox Automotive show that new-vehicle inventory was down slightly in July, while production and sales continue to fluctuate. Even so, the automotive industry is pushing ahead to try to navigate the challenging terrain. It will be interesting to see how this fluctuation pans out and how the industry responds going forward.
1. July Vehicle Inventory Slips– But Production and Sales Remain Steady
June saw a strange trend for vehicle inventories, as they experienced a rare dip. Despite this decline, production and sales of vehicles have remained fairly steady, meaning the vehicle market is healthy and the month of July should be an interesting one.
The decline in inventories is a cause for concern, as it could indicate an unbalanced supply and demand for vehicles. But there is silver lining: dealers appear to be keeping their stocks in check, in order to keep prices equitable and the parts and tools market healthy.
- Good news for existing inventory: Stocks of existing parts have remained fairly constant, meaning no disruption in the ability to purchase parts for current vehicles in the market.
- Potential growth in production: Manufacturing output has continued to be steady and could increase in response to better-balanced inventories.
- Look out for sales: Sales of vehicle have been steady and could improve in the coming months, as prices become more competitive in the market.
2. Cox Automotive: Inventory Decrease a Sign of Positive Activity
According to a report by Cox Automotive, the number of cars available for sale in the U.S decreased by 13% in the first quarter of 2021, compared to the same period in 2020. Although this is a decrease on the surface, it could be a sign of positive activity in the auto industry.
Signs of Improved Finances and More Precautionary Purchasing
The report indicates that the decrease is largely related to the improved finances of dealerships as a result of the government stimulus package – they can now purchase fewer vehicles on the lot while still maintaining an operational balance. Additionally, it reflects a shift to cautious purchasing habits and an effort to maintain inventory levels for positive cash flow.
- Improved dealership finances
- Cautious purchasing habits
- Steadier inventory levels
The report also suggests that the reduced inventory levels could have a positive impact on vehicle prices in the future, as buyers will be able to secure cars with lower asking prices as the supply is increasingly limited.
3. Where Does the Automotive Industry Go From Here?
Consolidation – As the automotive industry evolves, companies must begin looking toward consolidation in order to remain successful in a rapidly changing market. Automakers must restructure their model portfolios, invest into other markets and consolidate operations to develop buyer groups and vehicles that can avoid autonomy, ride-sharing, and electric vehicles. It is important that the automotive industry works to streamline supply chains to be able to keep up with technology advances and customer demands.
Adaptability – Unknown or unexpected changes are sure to come in the automotive industry in the near future, and companies will have to prepare. Businesses must become more agile and flexible in order to weather storms like an increase in tariffs or sudden changes in the market for commodities that are necessary to the production of vehicles. Building a stable and balanced supply chain should be the priority, so the automotive industry is prepared for changes in the market or the demand for different products.
- Restructure model portfolios
- Invest in other markets
- Consolidate operations
- Streamline supply chains
- Become agile and flexible
- Build a stable and balanced supply chain
4. The Future of New Vehicle Sales and Production
It’s no secret that the industry of vehicles sales and production is rapidly changing. Just this last decade, the world of automotives has been shaken up with revolutionary ideas and technologies.
What this means for the future of vehicle sales and production is cause for optimistic hope. Automakers are pursuing greener and better mileage options for their vehicles. Alternative fuel sources such as electric and hybrid cars are becoming increasingly popular. Autonomous vehicles from AI companies are sure to spur the market for the driverless car. And automakers are searching for ways to integrate vehicle tech into many facets of society, such as ride-sharing, self-charging, and onboard Wi-Fi.
- Alternative Fuel Sources: With electric and hybrid vehicles becoming more affordable and quite a few countries implementing legislation and incentives to maximize their adoption, the use of traditional gasoline-powered cars is in decline.
- Autonomous Vehicle: Enabled by the growth of AI technology, autonomous vehicles are not only likely to increase automotive safety but also have the potential to revolutionize the mobility sector, including public transport.
- Vehicle Tech Integration: Car manufacturers are developing technology that integrates vehicle technology into many aspects of society. The booming ride-share industry is the most visible example, but other options such as self-charging and onboard Wi-Fi are also in development.
It’s quite clear that the auto industry is still in flux and, with the uncertainty that uncertainty brings, it’s hard to tell how it will change in the coming months. Whatever the case may be, though, it’s safe to say that July was an interesting month in the auto industry, and a great sign of things to come.
