Between high prices, high interest rates, and some dealers thinking it’s still 2022 out here, it’s been a crappy time to buy a new car. In this lingering, smoking sales weirdness of recovering from multi-million car volume shortages, everyone seems to be wondering if we’ll ever get back to anything resembling normal.
The good news is that a light may be at the end of the tunnel. As analysts have shown, the automotive industry has been making serious ground on closing the gap between pre-pandemic sales volume and current sales volume, and it certainly isn’t done yet.
At the same time, Mercedes-Benz might reportedly bring luxury midsize vans to America, Stellantis invests big in South America, and Shawn Fain is headed to the White House. All this on today’s edition of The Morning Dump.
One Million Sales Down, One More To Go
For the past few years, everyone’s been asking when the car market might return to normal. Might we have to settle for a new abnormal, and like Julian Casablancas asked, is this it? Well, don’t let your horses out of the stable just yet. The latest industry sales figures are out and, as Automotive News reports, they’re way up, as if they’re trying to make up lost ground:
So how does this fit into a bigger picture? Well, clever analysts use something called seasonally adjusted annual rate, or SAAR for short, to normalize sales to report on how the car industry is doing. As it happens, Automotive News reported on that number as well, and signs are good.
The seasonally adjusted annualized rate of sales tallied 16.01 million last month, Motor Intelligence said, easily exceeding forecasts of 15.4 million to 15.5 million. It was well above February 2023’s 15 million sales pace and January’s 15.06 million rate.
Well, that’s a huge leap. For the record, the National Automobile Dealers Association reported that 2020’s SAAR was just 14.56, 2021’s SAAR totaled out to just 14.93 million units, and CNBC reported that in 2019 SAAR managed out to more than 17 million vehicles. We’re in the midst of a massive improvement, and with more than a million lost annual units made up for, it’s worth acknowledging that we’re largely in the homestretch when it comes to returning to normal volume. Mind you, as long as interest rates remain relatively high and new car prices keep climbing, people will be priced out of the market for new transportation, and that’s a double-edged sword. On the one hand, it takes pressure off the new car market. On the other, new car financing is typically easier to procure than used car financing, and people may be forced to accept significantly more used vehicles than they used to.
However, increased new vehicle sales do offer hope that used car values may continue to decline from meteoric highs. As it stood mid-February, the Manheim index of used vehicle values stood at 202.1, its lowest since March of 2021 but still 51.6 points higher than 2019’s average, the last truly normal year of pre-pandemic car sales. Even over five years, a 51.6-point change is abnormal, and anything that can shrink that gap closer to the 17.3-point change we saw between 2014 and 2019 is a good thing.
Stellantis Doubles Down On South America
The new Dodge Charger may be igniting the internet right now, but this isn’t the time for Stellantis to sit back and take in the applause. The automaker just announced a €5.6 billion investment into South America over five years, with more than 40 new products on the way through 2030. While some hoopla’s been made regarding supply chain decarbonization, a more tangible result in the eyes of consumers will likely be bio-hybrids, vehicles that run on a combination of electricity and biofuels. Think sugar cane ethanol. As per Stellantis:
The production of the first vehicles equipped with Bio-Hybrid technology is flexible and can be integrated into various models manufactured by Stellantis. It is compatible with all production lines of the Company in the region. The new hybrid and electric technologies are expected to strengthen Brazilian engineering and the domestic industry. The Bio-Hybrid technology is supported by three hybrid powertrains that will be gradually produced and introduced to the market. These new technologies include Bio-Hybrid, Bio-Hybrid electrified dual-clutch transmissions (eDCT), Bio-Hybrid Plug-In, and BEV (100% electric). The new hybrid technologies will start to be available by the end of 2024.
Stellantis is currently the biggest automaker in South America and Brazil, but it’s facing competitive threats from Chinese automakers. BYD and GWM have announced plans to build assembly plants in Brazil, and that means a fight is brewing. It’s another fight in the war of automotive supremacy, and survival may well be at stake.
Mercedes-Benz Might Try Midsize Vans In America Again
It’s been a trying time for smaller vans in America, with all of them dying in rapid succession. Although the Mercedes-Benz Metris had some minor success, but didn’t quite pan out, with Mercedes-Benz bowing out of the market at the end of last year. However, the impending arrival of the Volkswagen ID.Buzz has given Mercedes-Benz a chance to put its thinking caps on, and Automotive News reports the brand will launch midsize electric luxury vans in America.
Given Westfalia’s recent work with Mercedes-Benz, an electric Westfalia campervan could be exactly what Mercedes needs to fire a bottle rocket through the ID.Buzz’s mailbox. However, there is another niche Mercedes-Benz should consider. The rich and famous love their luxury Sprinter and Metris conversion vans, and launching the weirdest Maybach model ever could print money hand-over-fist. It doesn’t even need to have a two-lane bowling alley or a fish tank in the middle of the dash, it just has to make occupants feel like they just hopped off the private jet and into another private jet. Just trust me on this one.
Shawn Fain Is Headed To State of the Union
The biggest name in automobiles right now might just be United Auto Workers union president Shawn Fain, who rose to prominence during the 2023 UAW strike by telling the big three that union workers weren’t going to lay down and take it anymore. Regardless of how you feel about recent UAW efforts, this is an important political play for the Biden administration. As per the Detroit News:
Fain will be a guest of first lady Jill Biden, joining her in the House gallery viewing box for speech. Biden, a self-described friend of labor, visited a Wayne County picket line to support the UAW’s strike last fall. He earned the influential labor union’s endorsement in January.
“Each of these individuals were invited by the White House because they personify issues or themes to be addressed by the President in his speech, or they embody the Biden-Harris Administration’s policies at work for the American people,” the White House said in Thursday’s announcement.
Michigan is gaining attention as a battleground state, and Fain’s UAW leadership has done a lot for auto workers. Strong leadership and bold tactics during last year’s UAW strike saw unionized workers gain impressive compensation, and equally importantly, signaled a break from the tradition of UAW leaders and automaker brass being chummy. Add in a recent drive to unionize more auto companies’ workforces, with a majority of Mercedes-Benz plant workers in Alabama signing union cards last month, and you can’t help but sense that some big things are ahead.
What I’m Listening To While Writing TMD
Thursday is Friday’s little brother, and as sun’s beaming through my window, one might think it’s the right sort of morning to ease into things with a mug full of matcha, some smooth indie pop, and perhaps even biscotti. Not today, though. It’s “Blinding Faith,” the latest track from Knocked Loose. Now open up this pit, motherfuckers.
The Big Question
In this talk of increased sales volume, it’s worth noting that buyers are often limited by interest rates and borrowing power. One great example is that although EVs may be cheaper to dump energy into than combustion-powered cars, not everyone has the borrowing power to buy a new EV, even if their current car payment and monthly fuel total evens out to the monthly payment on say, a Tesla Model 3. Likewise, just because someone can afford a Camry at 3.9 percent doesn’t mean they can afford the same Camry at 6.9 percent. So, how have interest rates and borrowing power affected your car buying endeavors?
(Photo credits: yonkershonda licensed under CC BY-SA 2.0, Stellantis, Mercedes-Benz, UAW)
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I think this is the first time that the TMD music was heavier than what I was listening too while reading it (Luminescent Bridge by Blood Incantation)! Keep up the eclectic mix!
Interest rates aren’t a big factor for me, but prices and range/charging/quirks are. The current EVs have a lot of first-gens with various quirks that are getting ironed out with later refreshes. Range and charge speed are kind of at a point where road trips are still pretty annoying, but only need minor refreshes to fix that (like the Polestar 2 AWD that should get a NACS connector and the larger faster-charging battery that the RWD version just got). Sale prices have come way down, under MSRP instead of over, even if they’re still a tad high. Most likely I’ll end up buying a 2025 Polestar 2, EV6, or Mach-E.
Stupid msrp, limited availability. Bought out the lease on my Accord at a decent bank rate. Till these come back to earth, I’m out of the market.
Even if the SAAR reaches 2019’s 17 million we need to account for population growth which is probably around 7% higher in 2024 than it was in 2019.
Have we reached peak car per capita?
I think high interest rates were a blessing in disguise. Kept me from buying a car I wanted but didn’t need and taking on a big payment. Instead I decided I’d keep my DD and get a fun, 2nd car instead, paying cash. It’s worked out.
“Think sugar cane ethanol.”
Sugar cane ethanol production in Brazil is flat, while corn ethanol production is growing rapidly. In fact the 22nd corn ethanol refinery in Brazil recently opened, and corn ethanol production is now over 20% of total ethanol production. New corn seed varieties have come out for Brazil that allow for two corn harvests per year, and now they have more corn than they know what to do with.
Baring a sudden, and significant lifestyle change; I’m still two years out from buying anything, used or new. Interest on used car loans are just too much of a bitter pill to swallow, and new cars are just too damn expensive for me to consider right now. Should my Civic randomly self immolate or something I’d be back at the bottom of the used car market, even 10K seems like too much right now.