Tight Supply Sends Some Prices Well Over Sticker

First Up 06/01/21

Tight Supply Sends Some Prices Well Over Sticker

In the past, above-sticker prices for new vehicles typically have been limited to extremely hot newcomers, such as the Chevrolet Corvette C8 or Honda Civic Type R. Now with high demand and scant inventory, the practice is becoming almost common, reports Automotive News. Through Wednesday, May 26, 69 percent of new-vehicle transactions in the month were near or above the manufacturer's suggested retail price. That's up from 41 percent last May and 36 percent in May 2019, according to J.D. Power. "Dealers are exceptionally profitable right now," said Tyson Jominy, vice president of data and analytics at J.D. Power. He pointed to figures released Friday, May 28, that show total retailer profit per unit, including grosses and F&I income, is on pace to reach an all-time high of $3,245 — more than double the $1,567 earned a year earlier. Grosses have exceeded $2,000 for nine of the last 10 months, according to J.D Power. Automakers generally discourage raising prices above the MSRP, but they acknowledge that dealers are independent retailers that set their own prices based on local market conditions. Read more here (Source: Automotive News). 

Tesla's Vehicle Price Increases Due to Supply Chain Pressure, Musk Says

According to Reuters, the price of Tesla vehicles is increasing due to supply chain pressures across the auto industry, particularly for raw materials, Elon Musk said on Monday in response to a tweet. "Prices increasing due to major supply chain price pressure industry-wide. Raw materials especially," Musk said in a tweet. He was responding to an unverified Twitter account called @Ryanth3nerd, which said, "I really don't like the direction @tesla is going raising prices of vehicles but removing features like lumbar for the Model Y...” During an an earnings conference call in April, Musk said Tesla had experienced “some of the most difficult supply chain challenges,” citing a chip shortage. “We’re mostly out of that particular problem,” he added at the time. Read more here (Source: Reuters). 

Daimler, Nokia End Mobile Tech War That Threatened Car Sales

Daimler AG and Nokia Oyj settled their dispute over the licensing of wireless technology patents in cars, ending a legal battle that has been watched beyond the auto industry and initially threatened sales of the iconic Mercedes brand in its home country. According to Bloomberg, the deal resolves all legal proceedings between the two, including a complaint made by Daimler to the European Commission about Nokia. The companies agreed not to disclose the terms of the pact in a joint statement. The settlement “is a hugely significant milestone which validates the quality of our patent portfolio, the contribution of Nokia’s R&D to the connected vehicle industry, and the growth opportunities for our automotive licensing program,” Jenni Lukander, president of Nokia Technologies, said in the statement. Nokia and Daimler locked horns in Germany’s courts last year because the maker of the Mercedes-Benz refused the Finnish company’s demand to pay a lump sum for patents used in its vehicles. Read more here (Source: Bloomberg). 

Hyundai Eyes Subscription Program to Draw Buyers to Ioniq EV

Hyundai is so confident that its new Ioniq 5 crossover will convert on-the-fence buyers to the EV lifestyle that the automaker plans to offer shoppers a few months behind the wheel before making a final decision, reports Automotive News. Although Hyundai is still working out the details of its try-and-buy program, preliminary plans are to offer a subscription for one to three months with payments covering the electric vehicle, insurance and maintenance. Hyundai will target potential EV pioneers who first want to see if they can make the transition from a gasoline-powered vehicle. "When you try before you buy and you find it can work for you in your everyday life, you tend to now want to move toward potentially owning," said Olabisi Boyle, vice president of product planning and mobility strategy at Hyundai Motor North America. "We do expect that they'll transition from try to buy." Hyundai's subscription program is just one element of the brand's full-court press with its first EV on a dedicated platform. Read more here (Source: Automotive News). 

Used Cars Get More Valuable Over Time

Used cars are not fine wine. They don’t get better with age. Yet, reports Forbes, in tandem with high new-car prices, used-car prices are soaring, too — so much so, that some used vehicles are actually appreciating in value over time, according to the latest report on used-vehicle values from KAR Global. “Average wholesale used-vehicle prices cracked the $14,000 mark for the first time ever in April and then proceeded to set new highs, above $15,000 in May,” said Tom Kontos, chief economist for KAR Global, in a recent webinar. “This is the latest sign of the seemingly never-ending rise in wholesale values, resulting from a deluge in demand, and a drought in supply,” he said. Wholesale prices in April averaged $14,436, according to KAR Global’s latest monthly analysis. That was an increase of 5.9% vs. March 2021, and up 50% relative to April 2020. Read more here (Source: Forbes). 


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