The state of pickup trucks, dropping used car prices, China's EV challenge in Mexico

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1. The once-booming truck market seems to be shifting gear

At a glance: After years of sky-high prices and soaring demand, the mighty full-size pickup truck is facing a reckoning. 

Behind the news: New insights from CarEdge reveal that the market days supply (the number of days it would take to sell the current inventory) of full-size pickup trucks across the ‘Big 3’ domestic brands is nearly 50% higher than the average days supply of all brands. 

Data breakdown: 

• Ford has a 109 days supply of F-150s

  • Average list price: $58,433

• Ram has a 93 days supply of RAM 1500s (most are 2023s)

  • Average list price: $60,120

• Chevrolet has a 113 days supply of Silverado 1500s

  • Average list price: $53,873

State of play: Ram pickup truck sales and Ford F-series truck sales faltered in Q1, falling 15% and 10%, respectively. Chevrolet’s Silverado sales were mostly flat, increasing by 2%.

Looking ahead: A glut of inventory and decreasing market share will likely create a recipe for even greater manufacturer incentives and even outright MSRP reductions as we continue on in 2024.

2. Wholesale use car prices fall so far in April

News:  Prices for used cars sold at auction dropped during the first 15 days of April, according to the Manheim Index.

When adjusted for car types, mileage, and seasonal trends, prices fell 1.9% compared to March 2024. The index hasn't been this low in three years.

Basically, prices have dropped meaningfully year-over-year (YoY). The index is down 13.7% from April 2023, and all major vehicle categories (SUVs, trucks, cars) have experienced similar drops.

By the numbers:

• Luxury vehicles are faring slightly better than the market average declining by 12.7% YoY.

• Compact cars have seen the steepest decline at 17.1% YoY.

Of note: The current data includes vehicles that meet their market clearing price at auctions, excluding those that do not sell.

Behind the trend: Analysts say the drop in used-vehicle values is due to rising new vehicle inventories, falling new car prices, and more factory discounts. These factors led some consumers to shift to new cars.

What it means: Wholesale used vehicle prices can be an indicator of future retail prices, but not always. Car buyers could see used car prices coming down if this trend continues, but it could take some time to trickle down to the retail market. 

More to the story: The average daily sales conversion rate, which indicates the percentage of cars sold at auction, is lower compared to both March 2024 and even April 2019. This suggests that fewer buyers are participating in auctions.

What’s likely happening is that a higher percentage of trade-ins are being retailed directly by dealers. After all, trade-ins can often be one of the most mutually beneficial deals in the car business.

3. Mexico curbs incentives for Chinese automakers

What's happening: Facing mounting pressure from the U.S., Mexico is pumping the brakes on incentives for Chinese automakers, Reuters reports.

Details: Sources told Reuters that, at a meeting in January, Mexican officials made it clear that low-cost public land or tax cuts for investment in EV production are no longer on the table. 

Why it matters: This stance aims to protect U.S. interests and prevent Chinese firms from using Mexico as a backdoor into the U.S. market, bypassing the 27.5% tariffs.

Right now, imports from Mexico built with Chinese parts pay only a 2.5% duty under the US-Mexico-Canada Agreement (USMCA).

Of note: There are currently about 20 Chinese auto brands in Mexico, none of which have established manufacturing facilities there. 

On Capitol Hill: Several U.S. lawmakers are stepping in to prevent Chinese EVs from flooding—or even entering— the American market.

Senator Marco Rubio (R-FL) introduced legislation to raise Chinese auto tariffs and close any “loopholes” in the system.

Senator Sherrod Brown (D–Ohio) has called for a complete ban on electric vehicles from Chinese manufacturers.

In a recent letter to President Joe Biden, he writes:

Bottomline: Mexican officials recognize the potential economic boost of Chinese investments, but they are cautious of upsetting Washington as the USMCA approaches its 2026 review.

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Thanks for stopping by today. We hope to see you back here again tomorrow.

— CDG