In GM’s third-quarter earnings, the automaker highlighted the success of its small SUVs, including the Chevrolet Trax, seeing sales up 16% for the vehicle starting in the low $20,000s. The automaker also touted a 29% jump in Chevrolet Corvette sales, with a price tag more than triple.
The GM report illustrated the reality of the current market during a K-shaped economy, where vehicles on both ends of the price spectrum are moving.
Driving the news: CarGurus’ Q3 Intelligence Report pointed out that vehicles under $30,000 are in the tightest supply (just north of 50 days) and have the highest sell-through rate (75.1%).
Conversely, vehicles priced above $80,000 are seeing a sell-through rate of 61.9%.
In the middle, vehicles are lagging, with sell-through rates for units priced between $50,000 and $80,000 ranging from 52% to 57%.
Zooming in: CarGurus’ Director of Economic and Market Intelligence Kevin Roberts told CDG News that two different consumers are pulling the market:
Consumers looking for more affordable options under the average price of $50,000.
And more affluent consumers are purchasing premium and luxury vehicles.
“It's really that if you're above $50K and up to $80K, that's probably where you're feeling a little bit more of a pinch on the sell-through rate on the new side and a little bit more challenging to move those vehicles,” Roberts said. “Because with the K shape, you've got the people who, if you're just looking for a more affordable vehicle out there, you're probably going to go for the lower-priced vehicle or the more affordable vehicle out there. And then if you aren't feeling the pinch at all and aren't really concerned about price, then you're probably going to go with a much higher-end margin vehicle. So it's kind of those above the average price, but not into the real high luxury side of things, is probably where you're feeling that most pronounced kind of squeeze.”
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Rise in V8s: Another trend at the top of the market is the increase in V8 options.
The share of V8 listings is up 19% year-over-year, with an average list price of $75,000.
Sales are behind the increase in inventory gains for V8s.
The top-performing V8 is the Chevrolet Silverado 1500 with 12.2% of sales, with the lowest listing price of the top 10 at $56,600.
Roberts attributed the new arrivals of V8s to policy changes and automakers’ profit margins on the models.
“A lot of the penalties that would've been there for V8s have kind of gone away,” Roberts said. “And to the same point for automakers looking to maximize margin, there's a premium out there for V8s and consumers really like them still.”
Bottom line: Heading into the end of the year, dealers should consider the two types of customers hitting the lot and prepare inventory accordingly.
“The main takeaway is still probably the same one it's been for several months now, which is the more affordable inventory you can get on your lot for consumers is where the volume is going to be,” Roberts said. “Obviously, there is room on the high-end side of things for that K-shaped economy on the high-end side, but for volume and more mainstream consumers, the more affordable inventory you can have on your lot, both on the new and used side, is going to be the biggest draw for consumers and getting people on your lot.”
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