Soaring Costs Attributed to Sustained Demand, Limited Buying Options and Reduced Dealer Incentives
BOSTON–(BUSINESS WIRE)–#carbuying—Motus, the definitive leader in anywhere workforce solutions, today released its new report, 2021 Vehicle Trends: A Seller’s Market. The report explores how the disparity between supply and demand forced a pricing bubble, amplifying residual values and costs, and what that means for consumers moving forward. According to the findings, high demand, limited purchasing options and the absence of dealer incentives are driving prices to record highs. As a result, Motus estimates the average new vehicle retail transaction price will eclipse $40,000 for the first time ever during the second half of the year.
The ramifications of pandemic-related lockdowns continue to reverberate throughout the U.S. automotive industry, significantly impacting the supply of vehicles and their necessary components. Despite an extraordinary amount of new vehicle sales throughout the first half 2021 and sustained demand, the report found the impact of fewer available vehicles is starting to have a material effect. Vehicle sales slipped 12% from April to May, followed by a 9% decline in units sold from May to June. Prices are continuing to trend upwards as eager buyers are willing to pay a premium for the car they’re looking for and the average dealer incentive is expected decrease 43% year-over-year from $4,349 to $2,492.
“While the demand for vehicles has exceeded post-pandemic expectations, inventories remain decimated as a result of production constraints,” said Ken Robinson, Market Research Manager at Motus. “The shortage of available options coupled with an abundance of buyers will likely keep a high floor under new vehicle prices. As prices continue to rise, we’re seeing a growing divide between larger, more expensive vehicles and smaller, more affordable options. This decline in affordable vehicle options could create a new barrier to entry for many buyers.”
The report also found that one of the most limiting impacts across the global automotive supply chain has been the chip component shortage. As vehicle demand diminished at the height of the pandemic, factories that remained open shifted their focus to supporting industries that thrived during lockdown and have since struggled to meet the increased chip production demand. According to the report, new cars are heavily reliant on these components and approximately 2 million vehicles are expected to be lost from production in 2021 because of chip shortages.
Additional findings in the 2021 Vehicle Trends Report include:
- U.S. vehicle sales in June saw a 24% year-over-year increase when compared to 2020 and trails June 2019 sales totals by just 9%.
- Large vehicle demand remains prevalent, as trucks and SUVs accounted for 76% of new car sales in June.
- Every major vehicle market segment has seen a year-over-year price increase of at least 25% since 2019, with pickups climbing by as much as a 52%.
- In 2021, vehicle depreciation will remain 70% lower than pre-pandemic levels. The disruption of 2020 resulted in an 88% year-over-year depreciation decrease.
- New vehicle demand was also driven commuters who opted out of ridesharing and public transportation in favor of private vehicle ownership. U.S. public transit experienced a 73% decline in ridership as a result of COVID-19 in 2020 and national mass transit volumes currently remain nearly 50% below their pre-pandemic levels.
To download the full report, please visit: https://resources.motus.com/reports/2021-vehicle-trends-report.
Motus is the definitive expert in anywhere workforce solutions. Its platform and proprietary software simplify the reimbursement and management of vehicle, device, work and living costs through personalized calculations. Powered by an unmatched pool of data, refined over more than 80 years, and updated in real time, Motus is the platform of choice for top Fortune 500 companies and organizations committed to workplace agility. Motus automotive data, captured and analyzed across the world’s largest retained pool of drivers, also underpins the annual Internal Revenue Service (IRS) business mileage standard, the amount an individual can deduct for business vehicle expenses. For more information please visit www.motus.com or connect with us on Twitter, Facebook, Instagram or LinkedIn.
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