The automobile industry is showing signs of recovery from its severe shortages, reports Automotive News.
At the lowest point in the pandemic, inventory levels fell below 1 million. They have been climbing since August, and could top 2 million early in 2023, said Cox Automotive.
Automotive News reported the supply of new vehicles on the lot is up 66 percent from a year ago, while demand has increased only 2 percent, according to Charlie Chesbrough of Cox Automotive.
Last year, North American vehicle production rose 12 percent to 14.7 million. Momentum built towards the end of the year and in December, output topped 1.8 million vehicles for the first time in years, said Automotive News and Cox Automotive.
Vehicle production levels, however, vary by car maker. And COVID could interfere with production yet again. For example, Toyota said recently, it could produce as many as 10.6 million vehicles this year, (up from its earlier prediction of 9.2 million), but it warned of a 10 percent downside risk due to possible COVID spread and parts shortages, said Reuters.
Also, while more inventory may become available, dealers may not be rushing to fill up their lots. Lower inventory meant lower carrying costs.
Automotive News interviewees said that while dealers want more inventory than during the pandemic, they may not need “69 days” worth as before and “20 days” may be good enough. See more at Automotive News (subscription may be required).
Nevertheless Cox Automotive sees inventory levels rising. It wrote:
“New-vehicle production challenges are beginning to ebb, and inventory levels are measurably improving. While lingering supply chain and labor challenges will remain, and capacity will not return completely to pre-pandemic levels in the foreseeable future, stronger production levels and softer demand will lead to higher days’ supply and, ultimately, more vehicle options for shoppers in 2023.”
Contributing to lower demand for new vehicles this year are the high prices of new cars and higher loan interest rates, said Cox.