Epic Economist: Car Market Collapse Will Trigger The Biggest Shift In Prices As Companies Brace For Chaos Ahead
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The U.S. auto market is on the brink of a seismic shift that promises to bring relief to car buyers and send shockwaves through the industry. Prices are plummeting at an unprecedented rate, and as we approach the end of 2023, a perfect storm of factors is poised to unleash chaos in the car market. Buckle up as we delve into this unfolding saga and explore why the car market collapse is about to reshape the automotive landscape.
For those in the market for a new or used car, the news couldn’t be better. After enduring soaring prices for over a year, the U.S. auto market is finally undergoing the transformation many have been anxiously awaiting. Prices are tumbling, and it’s not just a minor dip – we’re talking about significant month-over-month declines that signal a major shift in the automotive landscape. In this article, we’ll dissect the factors at play and reveal why the car market is about to experience its most dramatic price shake-up in years.
The Bear Market Emerges: The first signal that something significant was afoot in the auto industry came with the onset of the second and third quarters of 2023. The market shifted into a lower gear, leaving experts and enthusiasts puzzled. However, the real bombshell came when analysts predicted an oversupply of vehicles that would culminate in an end-of-year price war. This price war is set to bring affordability back to somewhat ‘normal’ levels, providing a glimmer of hope for budget-conscious car shoppers.
Cox Automotive’s Insights: Leading the charge in uncovering the shifting dynamics of the car market is Cox Automotive, the custodian of the Manheim Vehicle Value Price Index. According to their experts, there’s a light at the end of the tunnel, albeit a dim one for the automotive industry. Wholesale prices have been steadily dropping throughout November, with dealers paying nearly 2.3% less for vehicles at auctions in the U.S. during the first half of the month. Now, wholesale prices have taken a nosedive, down by a staggering 5.3%. This downward spiral is already in motion, and history tells us that wholesale price drops typically translate into retail price drops within six to eight weeks.
Retail Prices Feeling the Heat: Retail prices are already beginning to reflect the turmoil in the industry. The Manheim Index for used vehicles plummeted to 206.1, officially marking its entry into bear market territory with a jaw-dropping 20% decline. On the flip side, new car prices have been on a more favorable trajectory for several months now. The data from the Index also reveals that pickups are currently selling for approximately 4.2% less at auction, while SUVs are down by 4.8%. Compact cars have taken the biggest hit, with a decline of 10.7%, and midsize cars aren’t far behind, dropping about 8%. In a surprising twist, the difference in average price between new and used cars has returned to levels last seen in 2019.
A Double-Edged Sword: While this news may be music to the ears of prospective car buyers who have been patiently waiting for relief, it carries a foreboding message for car manufacturers. According to UBS estimates, car production is set to exceed sales by a staggering 6% this year. This excess translates to a surplus of 5 million cars that will require substantial price cuts to clear from dealer lots before the year’s end. In fact, some manufacturers have already resorted to drastic measures, with electric vehicle giants like Lucid and Tesla slashing the prices of their popular models by nearly $20,000. The industry is bracing for impact as companies scramble to prevent financial hemorrhaging.
Industry in Panic Mode: Manufacturers and dealerships are now in a state of sheer panic as the holiday season looms large. With a pressing need to make space for the incoming 2024 models, the pressure to clear out the 2023 inventory is palpable. Every day a 2023 model sits on the lot, it eats into their profits, as dealership floorplanning expenses pile up. The urgency to sell cannot be overstated, and companies are leaving no stone unturned in their quest to achieve this.
Year-End Sales Extravaganza: 2023’s year-end sales are shaping up to be a spectacle like no other. If you’ve been holding out for low APR financing, now is the time to strike while the iron is red-hot because this opportunity may evaporate by January. With just six weeks remaining in the year, the final quarter carries extraordinary weight for car makers and dealerships alike. Meeting sales targets is no longer merely a corporate goal but a lifeline for survival. Employee bonuses, business success, and the future of the industry hang in the balance, intensifying the pressure to move every vehicle possible in December.
Prepare for the Storm: As we hurtle towards the end of 2023, prepare for the sharp price declines that experts have been warning about all year. Prices are poised to drop more abruptly than anticipated as companies fight tooth and nail to bolster their financial results, masking their losses and diverting attention from the unfolding crisis in the sector with short-term gains. Brace for a wild ride in the car market as it undergoes its most significant transformation in recent memory.
In conclusion, the car market is on the cusp of a seismic shift, with prices plummeting, manufacturers scrambling to stay afloat, and car buyers poised to benefit from unprecedented affordability. As we navigate the turbulent waters of the automotive industry, it’s clear that the coming months will be a rollercoaster ride. Buckle up and get ready for the biggest shift in car prices in recent history. The chaos is just beginning.
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