When the number of cars for sale dropped rapidly during the pandemic it gave automakers a chance to reap huge profits by slashing incentives and prioritizing higher trim-level models over more affordable trims. That trick does not work forever.
There’s just a Costco-sized jar of data and info this week I want to get to and, as best as I can, I’m going to try and tie it up into a theme. That theme is: The cars are too damn expensive.
Also, it’s Friday, let’s check in on the strike while we’re here. And maybe Chinese exports of graphite, because I love talking about graphite. Who doesn’t?
The Cars Are Too Damn Expensive
Every month, car buying site CarEdge puts out Market Day Supply (MDS), which attempts to determine how long it would take to sell the current listed inventory by comparing how many cars are for sale and how many sold over 45 days.
This data is extremely raw, and CarEdge, in spite of my complaints, doesn’t always do a good job of explaining why certain cars might have longer selling periods. For example, in the most recent data you’ll see that heavy-duty Ram pickups show a market supply of 460 days, which quite possibly is a result of the stop-sale for those trucks earlier this year.
That caveat aside, the data (culled from public listings) is still pretty fun to look at and allows me to write articles about America having a 750-day supply of Jeep Renegades. To the surprise of absolutely no one, the Jeep Grand Wagoneer is near the top of this list with a Market Day Supply of 336 days.
Why? The average transaction price of $104,821 probably has something to do with it. In fact, almost all of the cars on this list transact above the industry-wide average transaction price of around $48,000.
The only car that’s below it is the Dodge Hornet at $37,588 — a vehicle that recently went on sale and doesn’t yet have a high level of awareness. Also, honestly, I can’t see spending almost $38k on a Dodge Hornet when you could literally buy almost any other crossover.
I’m also not surprised to see the EQS at a supply of 212 days and an average transaction price of $123,179. There’s an article worth reading from Automotive News this morning on exactly this issue, and it highlights my point from earlier that automakers are becoming victims of their own high trim levels, though this data shows a more conservative supply estimate:
[…]
As more proof of consumers starting to opt for attainable cars, the relatively affordable Mercedes-Benz GLC SUV shows up on the list of cars with the lowest supply at just 27 days and an ATP of just $57,272. In fact, the whole rest of the list of in-demand cars is roughly at or below the industry average.
Carmakers are usually rational actors so it makes sense they prioritized profits during the pandemic with higher margin vehicles, but now that the pandemic is over it seems foolish to keep the same strategy.
Certified Pre Owned Sales Are Up
Just as consumers are looking for affordable new cars, they’re also looking for nice and affordable used cars. This is where Certified Pre-Owned (CPO) cars shine, offering warrantied vehicles from dealers at sub-new-car prices.
According to Cox Automotive, year-to-date CPO sales have crossed 2 million units, which is a 9% year-over-year increase. Luxury CPO, no shock, is up 12% thanks to brands like Genesis, Acura, and Lexus.
In fact, CPOs are outpacing the overall used car market:
CPO is outperforming the used-vehicle market so far in 2023. For comparison, according to Cox Automotive estimates based on vehicle registration data, total used-vehicle sales in September decreased 3.2% from August to 3.0 million units. The seasonally adjusted annual rate, or SAAR, is estimated to have finished September near 35.8 million, up from last September’s 35.1 million pace, but down from August’s upwardly revised 36.0 million level. Year to date, retail used vehicle sales are down less than 1% through the end of September.
What’s the catch? Well, because of the downturn in leasing during the pandemic, it seems there aren’t enough CPO luxury cars for supply to meet demand.
China Is Cutting Graphite Exports
Batteries need a lot of stuff to work, stuff like lithium, gallium, phosphoric acid, and graphite. Basically, all EV batteries use graphite for their anodes.
Graphite, which is just crystalized carbon, is extremely abundant, but not many countries refine it to the level needed for batteries. Can you guess which country is, in fact, responsible for 90% of the world’s graphite for EV batteries? Yup, China.
And now China reportedly doesn’t want to share. Per Reuters:
China’s commerce ministry said the move on graphite was “conducive to ensuring the security and stability of the global supply chain and industrial chain, and conducive to better safeguarding national security and interests”.
It added that it was not targeting any specific country. Top buyers of graphite from China include Japan, the United States, India and South Korea, according to Chinese customs data.
Under the new restrictions, China will require as of Dec. 1 that exporters apply for permits to ship two types of graphite, including high-purity, high-hardness and high intensity synthetic graphite material, and natural flake graphite and its products.
This is happening against the backdrop of a world at the brink of war and, currently, some governments trying to keep China from exporting their EVs en masse to Western markets.
No End In Sight For Strike, Layoffs Continue
Today is Day 36 of the United Auto Workers strike and it’s not clear how, when, or why it’s going to end. Though the UAW has said it wasn’t going to make Friday its big strike announcement day, it does seem like the UAW might announce more strikes today.
While this is going on, automakers are beginning to expand layoffs in response, as reported by The Detroit News:
Stellantis on Friday said it was laying off an additional 100 employees at its Toledo Machining Plant in Ohio effective Monday, increasing the total laid off there to 170, because of the strike at its nearby Toledo Assembly Complex, which makes the Jeep Wrangler off-road SUV and Gladiator truck. The machining plant, which employs more than 400 hourly workers, has reached its maximum inventory level for components supplied to the assembly complex.
Stellantis now has 1,530 employees on temporary layoff stemming from downtime at its assembly plant that is on strike.
Ford Motor Co. also said it had laid off another 150 workers at its axle plant in Sterling Heights as a result of production impacts of the strike.
Sterling Heights makes axles for the Kentucky Truck Plant that the UAW decided to strike.
The Big Question
These questions have been a little one-note lately, so let’s have a fun Friday hypothetical: Let’s say you developed an incredibly addictive word-based game and sold it to The Washington Post for $20 million. You want to go racing. Do you:
- Join a rich-person racing program like Ferrari Challenge or Porsche Carrera Cup?
- Get a TCR car and try your hand at IMSA’s lower class?
- Fund a NASCAR truck team?
- Buy a vintage Mini Cooper and be one of those people at vintage races that’s 10/10ths all the time?
- Buy a $500 LeMons car?
- Other?
Regardless of how many millions in FU money it is, there is no question in my mind that I’d love to give jet boat racing a real go. If you aren’t familiar with it, trust me that you are gonna wanna see this (skip to the 0:40 mark):
https://www.youtube.com/watch?v=V1dEH07_jKM
Well good hell. Those things can TURN. thats nuts
For some reason I jumped to offshore powerboat racing, which appears to be as far from this as one could get.
Ha! Yeah, offshore/hydroplane racing is way too intense. That stuff is “chasing the dragon” level of adrenaline. Fun to watch live, though. Jet boats do have some gnarly crashes occasionally, but for the most part, you just end up in the cattails or on the shore in the mud.
Yeah, for God knows what reason there was a twin hull from the 90’s for sale a bit south of here in Central IL that caught my interest. Formerly ran a pair of Lambo marine V12s. A couple videos of it running on YouTube and I quickly determined that sport was not for me (as if I could afford it). If your boat spends more time in the air than the water, how is it a boat?
My good buddy growing up had a Donzi Blackhawk Edition that went between 82-85 mph depending on the water and how the trim was set. It was insanely fun to just ride in, but like you say, about 80% of the hull was out of the water at full throttle. Just the stern/engine and the prop were touching. God forbid you caught the wake of another boat and the whole damn thing was airborne with the prop screaming like a buzzsaw in midair. It was pretty damn dangerous looking back on it, but the stupidity of youth and all that jazz. Good times! lol
Boat racing = I want to die but I want it to look like an accident. It’s been like 50 years since the water-speed record has been beaten, because everyone who attempts it died.
Who’s talking about breaking world records? I’d just like to do the timed sprint laps, not be the second coming of Travis Pastrana, lol
What we need to do is recognize UNECE standards and eliminate the 25% coward-ass chicken tax. Cheap Chinese and Latin American cars will fill in the lower-end that everyone else abandoned. Actually, they still can. The Chinese can undercut ANYBODY, and they don’t shit like tariffs get in the way. In a few years, we’ll see a cheap sub-10k Chinese new car.
The Mirage has shot up in price as the cheaper cars it competed with were discontinued. A few years ago, you could get one for 10k. Now they’re near 20k.
And no, carmakers are NOT usually rational actors. Maybe Toyota and Honda are, but definitely not GM. We keep having to bail out the consequences of their shitty decision making.
The UAW is overplaying its hand here. They should drop the pension demand, as pensions are outdated and unsustainable. Just give a much more generous 401k instead. 10% match, 10% automatic contribution in addition to that (currently both numbers are 5% each). Even that much more generous 401k is STILL cheaper than maintaining a pension.
They should also seek a works-council like they have in Germany. Half the executive board would be labor. These board members can even be elected like they (just finally) elected their president.
And the biggest focus needs to be on limiting the number of temps and requiring them to be converted to full time, with time spent as a temp counting towards the benefits and seniority.
For the racing, IDK, maybe LeMons or Chumpcar. OR even an “eco” car race, where you get two cheap shitty non-running cars, put them in neutral, and have someone push each car to see which one goes the farthest LOL
Big Question:
If I really truly wanted to Get Gud at racing, I’d take that $20 million and move to Finland with it. There’s a ton a local community rally racing, both on dirt and on ice that go on year-round. Usually done with total shitboxes (ala LeMons style), but the competition is fierce as hell. There’s a reason Finland has produced more F1 champs per-capita than any other country.
Also 8 WRC champions, France is second with three.
I think the biggest reason for really oversaturated market supply on so many of these higher end cars is purely down to interest rates. The massive rate hikes in just the past 12 months has been enough to add $200+ or an extra 12 months to a 30-40k car loan, such that people are realizing that it’s not worth upgrading a 4 year old car like it was during the pandemic when you could essentially trade in a used car at near sticker and get a new one with 1.9% financing.
That coupled with steep EV depreciation curves on higher than ICE equivalent MSRPs, and you’ve got a lot of people running the numbers who may WANT an EV that realize it’s not worth jumping into one right now, and they might as well hold onto their ICE car an extra 2-3 years until the math makes more sense.
On the front of 20M, easy call on a LeMons car, and a lot of driver coaching.
I thinking on EVs people might also be holding out a year or two so their car plugs right into a Tesla Supercharger without an adapter. Also wonder if was with CCS or CHAdeMO connectors are going to suffer from early obsolescence and diminished values as a result.
Vintage Mini Cooper AND LeMons car. Then I’d get a sim rig and eat shit in whatever car I want when I wasn’t hooning a Mini Cooper. I’d also build some sweet cars. a 1969 Lincoln Continental with modern underpinnings and bagged would be first on the list. Then a completely restored Continental and a few Impalas and Bel Airs. Then when I ran out of money I’d sell all my cars and be back to where I started. Haha
With 20 million after taxes it would be like 10 million or less. I’m not particularly fond of racing myself but if I had to spend it on racing it would be on those demo derby races but we’d use cars that would otherwise be scrapped and use the proceeds to keep quality old cars out of of the crusher, maybe do charity auctions for said quality old cars after the races.
We can call it ‘Clashing Clunkers and Cash for Classics’
LeMons all the way.
One of history’s tried and true ways to make a small fortune is to start with a large one and get into racing. $20 million is starting with a relatively small fortune. That should fund a decade plus of Lemons racing.
If I got a $20musd I fear a depressingly small amount would actually escape taxes and ‘adult’ obligations like paying off debt and ensuring my family enjoys financial security from now through retirement. That said, I think I could justify enough to buy something vintage and interesting like a 1980 Ford Fiesta XR2 clone I recently saw for sale and use it to get serious about autocross, maybe even getting into SCCA Solo 2 competition.
Thanks for reinforcing the fact that I am not even remotely young anymore. “Vintage”
I mean, everyone knew this would happen. Manufacturers got incredibly greedy and decided they didn’t care that the supply of people who can drop absurd money on cars is finite. In the past low interest rates allowed some people to stretch their budgets a bit to get into the more expensive stuff, but those are dead and they may never come back, especially as long as the Fed keeps yelling YEE HAWWW and cranking rates into the stratosphere.
I actually think the average transaction price of a new car will go down over the next few years. $48,000 is not sustainable when the average household income in this country is hovering around $60,000. Wages are going to need to increase or prices are going to have to come down, and our corporate overlords aren’t going to give an extra cent to the working class until it becomes a life or death situation for them. Fortunately for everyone except the 1%, due to the UAW strikes we’re getting there 🙂
If I were to suddenly become a millionaire many times over I would simply buy several of the most desirable track cars out there with a focus on making sure the experiences between them vary significantly. I also wouldn’t want anything so rare and valuable that I’d be hesitant beat the shit out of it.
What comes to mind initially are: a Civic Type R, ZL1 Camaro, Dodge Demon 170, Corvette Z06, GT3 RS, Huracan Sterrato, and a Ferrari 812 GTS. Everything is covered with that assortment. We’ve got front wheel drive, rear wheel drive, all wheel drive, 4, 6, 8, 10, and 12 cylinders, manuals, dual clutches, a drag special, corner carvers, you name it. Plus the 812 and Z06 can give you an open roof experience.
I’d then pay for the fancy memberships at as many iconic tracks as possible and literally just travel around to them doing track days in my collection. I don’t really care that much about actual racing or times personally, I’d just want to sink all that money into having the most fun possible.
I’m not really into racing, buuuut, if I had the money I might be willing to open up an RC car track. Maybe I could have vintage races with things like the Tamiya Frog or Grasshopper and more modern races with Team Associated or Losi.
I’d be down! I’d love to break out the old Tamiya Bearhawk for a romp.
You know I’m on board with this idea.
I wanted a Frog so badly when I was a kid. Bugged my mom for about two months for my birthday. Probably better that she didn’t come through or else I would probably have another hobby today that I can’t afford.
NASCAR truck team all the way – the most bang for the buck fun of all the choices.
Real racing at real tracks but still with a grassroots vibe? Check. Colorful race vehicles with the possibility of all sorts of off the wall sponsors to supplement you? Check. Being able to sit in an infield box on weekends with a headset on and look all Roger Penske serious? Check and mate.
Even with the $20 million I think I’d start at the basics and go ice racing this winter locally, after that I’d work on graduating to local rally’s and eventually make my way up to national stuff.
Alternatively I’d buy a large property, carve a dirt track in it and host (+ participate in) local events
As the saying goes, if you want to make a small fortune in racing, start with a large fortune.
I’m all for the private cornfield rally-cross circuit.
Actual racing? I’d see about buying a Stadium Super Trucks seat.
I’m a simple man. For 20 mill, I’ll build a 9 second drag Camaro, and a Miata for Auto-cross. I can run this indefinitely with the money I have left over.
Like someone said below, I’d even buy some land and build my own tracks. Invite friends and other automobile enthusiast to come play on weekends.
I’d put my money in spaceship development to try and beat Elon in the race to Mars.
I’d put money into spaceship development if I could send just Elon to Mars.
1st: I finally finish building the damn Pinto project, but with a Cosworth DFV instead of the 2.3, and with an adjustable IRS with an 8.8″, upgraded brakes and then go CAMS autocrossing.
2nd: Buy a rally car and do ARA events after doing rally school.
If the whole 20 Mil is expected to support the racing endeavor, I’m buying 160 contiguous acres of decent crop land, leaving 120 of it as cash rented field and building track and facilities. Then I can hoon whatever I want on an income producing property that should pay to maintain itself.
I’d buy a place where I could put together a really fun Gambler car, then I would do fun Gambler builds every year or two.
Jeep was pretty ambitious with the GW pricing, and the ubiquitous $10-20K discounts are basically bringing the price down to what it always should have been (absolutely topped out at $100K, not starting there for the top trims).
It’s a nice vehicle, but not that nice.
Especially with all the glitchy electronics it comes with. I’ve read lots of complaints and downright horror stories online already.
With interest rates heading for the rafters and the possibility of recession looming, the automakers that start offering lower trims as a way to manage payment inflation will make out great. There’s gotta be an upper level of price/interest/months at some point that will kill new car sales if average sales price keeps rising.
Other: Buy a Baja bug or similarly cheap and cheerful offroad racer and desert race like a madman. Then use it for driving around town on our garbage roads because you need that kind of suspension compliance to deal with the giant potholes.
They opened up a circuit close to me, but for the most part it’s closed to us plebs. You have to buy a garage that costs as much as a house to use it because it’s only open to Fancy Kristen types. I think it’s even got an off-road course. So if I came into lottery money, I’d probably build my own out in the sticks.
As far as the automakers, they knew all along. They just wanted to see how long they could make it last.
Honestly I’d probably just get a Z06 and go to every track day I could find. It’s not technically racing but that keeps the pressure off. Just go have fun. Use the rest for fun stuff and to fill the garage.
If the rules of our hypothetical game are that I have to go racing, then I’d probably start a USF2000 or F4 team or something like that.
Combo 4/5/6: buy a $500 LeMons MINI and drive it 11/10ths until it blows. Then rinse & repeat…