2024 car market predictions are in 🔮

Hey, everyone. Did you see the viral tweet about the 1995 Honda Accord with just 2,187 miles on it? My take: The salesperson who traded for this car gets instant legend status. Would you buy a ’95 if it had mileage like that? 🙃

—CDG

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Today’s Biggest News

Will 2024 Bring Challenges Or Success?

Data for the final months of 2023 is starting to roll in. With it, we get a glimpse at what the next few months—and 2024 as a whole—might bring for the automotive industry. Today, let’s explore the biggest stats and what they mean for the car market.

Sales? Staying the course.

November’s selling rate came in where it landed for most months of 2023: around 15 million on a seasonally adjusted basis—aka short on much momentum, but recovering from some strike impacts that hit in October.

You can mostly chalk that up to dealers rebuilding inventories and dodging threats of a recession. But the lack of any horsepower in sales growth can also be attributed to an affordability crisis (more on that in a sec).

🔮 2024 prediction: “Over the course of the next few months, it's difficult to imagine auto sales getting a jump start from the current pace of demand, with the upshot being a bounce in early 2024 production creating a progression for inventory and incentive levels to develop come spring of 2024,” said Chris Hopson, principal analyst at S&P Global Mobility.

Pricing? Still a major concern.

Tons of auto publications have recently called vehicle pricing “stubbornly high,” but it’s worth taking a closer look at the numbers to understand where we’re really headed. The data →

• The average new car went for $48,247 in November. That’s down 1.5% from this time last year, but up about $311 from October.

• Part of the slight decrease in average prices comes c/o November’s incentives, according to Kelley Blue Book. Those were up just slightly from October…but remain historically low, all things considered.

🔮 2024 prediction: A huge part of the automotive industry narrative lately has focused on pricing as a deterrent for buyers—things are just too expensive right now. In fact, Tyson Jominy, vice president for data and analytics at J.D. Power, estimated there are “2 million sales on the sideline” because of a mix of inventory, interest rate issues, and…you guessed it, pricing. 

But as we look ahead to 2024, it’s worth exploring whether pricing might even out. FYI: November was the third straight month that car prices fell annually. And the Fed is expected to start cutting interest rates in the middle of next year.

Pricing is notoriously tough to predict (at least accurately). But I want to know…what do you think will happen to pricing in 2024?

Inventory? Getting a refresh.

Back in mid-October, new vehicle dealer inventory listings peaked just under 2.5 million units. Since then, we’ve seen a slight decrease to about 2.3 million in mid-November.

And about those 2024 models…they’re coming, as the inventory data shows. As of about a month ago, there were fewer 2023 models (about 955K) than 2024 models (about 1.3 million) on dealer lots.

🔮 2024 prediction: It’s all about hybrids. As of mid-November, there were 219K hybrids in dealer advertised inventories, S&P found. That stat had been ticking higher all summer and into the fall…so the hybrid inventory trend could very well continue as dealers work to meet growing demand for what many drivers consider the halfway point on our path to full electrification.

Dealer sentiment? Looking a bit glum.

Cox’s Dealer Sentiment Market Index dropped to the lowest level since Q2 of 2020 heading into the end of 2023. 

“Many auto dealers are seeing their profits decline from record highs in 2021 and 2022, and they are feeling the pinch from high interest rates,” said Cox Automotive Chief Economist Jonathan Smoke. “Their expenses have gone up significantly, and the downward pressure on pricing has cut into their margins. Clearly, the market dynamics are much more challenging for automobile dealers and especially franchised dealers than the market of just one year ago.”

🔮 2024 prediction: Dealers’ POV on the three months ahead isn’t so great—dealer sentiment suggests the dealer body is prepping for a weak-ish market heading into 2024.

So what does that mean for our industry? Many folks are concerned about the economy, interest rates, consumer sentiment, and how all those factors play into the pricing and margin realities of running a dealership.

There’s no silver bullet for solving those problems, especially the ones that are systemic to the entire industry. But as I’ve written before, this is the season for focusing on fundamentals. No matter what happens in 2024—and whether the market’s predictions come true or not—zeroing in on the basics is one way to strategize for weathering any storm.

This Week’s Episode of the CDG Podcast

If 2023 was the year for learning about AI, 2024 is shaping up to be the year for using AI. So how might artificial intelligence change the dealership experience?

Phil Oriani, CEO of Shift Digital, told me about the tech developments like AI that will have the biggest impact on the automotive space in the next year on the latest episode of the CDG Podcast. This is an important interview for anyone who wants to use tech instead of letting tech use them.

Listen to the episode here, and subscribe to the CDG Podcast on Apple, Spotify, or wherever else you get your podcasts. And thank you to Cars Commerce and AutoFi for making this episode possible.

Together With Cars Commerce

You know your store’s reputation is essential to the health of your business—but do you know how to diagnose it? ⭐️🩺

With so many reviews to read through, it's not easy to identify which specific aspects of your experience are resonating well (and not so well) with your customers.

Dealers: Check out your Cars Commerce Experience Report. 📊👀

This free report measures and tracks customer sentiment for each aspect of your experience—from lead follow-up to financing—and helps you benchmark those perceptions against your local market and OEM averages. 

Improve your experience. Build your reputation. Promote what makes you different. It all starts with using data to diagnose where you are today.

Get your Experience Report.

In Other News

News out of the service industry: Franchise dealerships are ceding their leadership position to general repair shops, according to Cox’s latest data. Dealerships accounted for 30% of all service visits in the US this year, down from 35% two years back.

Where service spending happens is important for a few reasons:

1. It’s big: Consumer spending in the auto care industry is set to pass $400 billion in the next two years.

2. It’s getting bigger: With higher prices (see above) and loan rates for new vehicles, drivers are keeping older models for longer…which means more repairs. In 2023, the average owner had their vehicle in for service or maintenance 2.5x a year, up from 2.3x in 2021.

So why are car owners going to independent repair shops instead of the dealer who sold them their vehicle? Trust, according to Cox. Fewer respondents said “trust” when asked why they chose to get repairs done at their dealership this year compared to the last time Cox ran the survey.

Shopper’s Corner

Welcome to Shopper’s Corner, where I answer the biggest questions about the car buying experience.

Answer: It depends. A few things to consider:

First: Even if the vehicle is relatively new and supposed to be covered by the original warranty, its Canadian warranty may not be honored in the US. You should always inquire with a franchised dealership of the brand you are considering. The dealership should be able to look up the vehicle by VIN and tell you whether the warranty is still in effect.

Second: Vehicle history reports, such as CarFax and AutoCheck, may not catch vehicle history events that happened in Canada. You may not know its service history and whether it has been involved in any accidents.

Third: Canadian winters are rough—rough enough to require chemicals to be used on roads during the snowy season. This means that vehicles from Canada are more prone to having rust issues. It may not be a problem for relatively new cars, but the ones over 4–5 years old may develop rust on underbody and suspension components that will result in costly repairs if not addressed promptly.

Bottom line: You can still buy a used car from Canada and get a good deal as long as you get an inspection from a trusted professional to know its true condition, service history, and upcoming maintenance and repair expenses.

The Backlot

• Are manufacturers lying about EV range?

• Tesla’s insurance unit will face a prospective class action lawsuit over “inflated” premiums, a California judge ruled.

• North of 90% of China's existing new energy vehicle models will continue to receive tax breaks on purchases, per new technical requirements unveiled earlier this week.

• GM has acquired one of Tesla’s key gigacasting suppliers. 

• With its stock under pressure, Lucid is getting the boot from the Nasdaq 100 stock index.

Thanks for reading. Now that we’ve made it through…how’s the end-of-year rush treating you? I’d love to hear about how business is going as we close out 2023. Hit reply and tell me what’s going on.

—CarDealershipGuy

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