Industry News: Auto Factories Slowing Down Due to Car Dealers' Overstocking

[Anthony Fongaro]

Car dealers have more cars in stock as of December since the spring of 2021. The metric car dealers use to measure their supplies is "days of inventory". This measures how long it would take to sell a new car at today's sales price. The age-old industry guideline is 60 days on a car lot.

According to Cox Automotive, the average dealer has a 71-day supply. When you have an oversupply, prices start to lower. KBB states that the average for new car prices dropped from November 2022 to November 2023. It's the third straight month with year-over-year pricing decreasing. 

Due to anticipation of a union strike, automakers stocked up on cars during the summer. When the United Auto Workers (UAW) initiated their strike, they utilized a different tactic. A few factories were closed, but many factories were at full capacity. 

Several automakers are slowing down factories. Stellantis has announced it is cutting one of its shifts at a Jeep plant In Detroit. Stellantis is also cutting jobs and production at a Jeep plant in Toledo, Ohio. Meanwhile, GM is putting several assembly pants with scheduled downtime for product changeovers and maintenance. 

Not all brands are affected by the oversupply issue. November 2023 Toyota dealers had an average of 32 days, with Honda, Kia, and Lexus below 50. Jeep has the worst oversupply issue with a 128-day supply. Nine brands had over 100 days' worth of vehicles. 

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[David]

I suspect change over to new ICE and EV models could have something to play with the build up as January and February are usual change over times in the factory.

On top of this, I suspect EV inventory will take a drop as Sales with the instant rebate take affect starting in only a few days.