Vehicle Inventory Levels May Be Similar to the Past, But Their Makeups are Not
Recently, I had the privilege of being on the Autoline After Hours program to talk about the unique supply and demand insights that we have at Cloud Theory. During the discussion, the program host—John McElroy—pointed out that the auto industry is nearing the 3.0 million mark in new vehicle inventory for 2024—a level that hasn’t been seen since the early days of the COVID pandemic.
And he asked an important question: “The car companies said at the time [of inventory constraints] ‘we’ve learned our lesson; we’ll never overproduce again!’…and yet we’re almost back to the same levels where we were pre-COVID. How does this happen?”
So, we dug into the details of our numbers and found that while vehicle counts may be similar to past levels, the market dynamics are decidedly not. One of the key advantages of the Cloud Theory data is that we have been collecting comprehensive inventory, vehicle movement, sales efficiency, and pricing information for more than seven years. This enables us to assess the competitive landscape before, during, and after the COVID era and understand the shifts that occurred as the industry recovered from the related supply chain issues that decimated inventories for more than two years.
In doing so, we compared the makeup of today’s 2.94 million new vehicles with the 3.13 million available in September 2019 before the pandemic wreaked its havoc. The most striking difference is the shift in brand supply, most notably the drop in General Motors counts (led by Chevrolet). Toyota and Honda are also running much leaner than they did in the pre-pandemic era.
It is not a coincidence that these brands with reduced inventory pools are also the OEMs that tend to be high on Cloud Theory’s Inventory Efficiency Index (IEI) rankings. Toyota has been a long-time leader on this metric, with Lexus recently rising through the ranks as well. With Honda in third place and three of the GM brands in our top 10, it is instructive that the OEMs that did “learn their lesson” are benefiting from that discipline.
The other notable dynamic is in the segment shifts that have occurred since September 2019. The drop in sedan numbers is reflective of OEMs deemphasizing or even discontinuing those models when supply chain issues pushed more of them to prioritize higher-margin production. The full-size truck changes are specifically related to the decline in inventory for Chevrolet and GMC. SUVs, meanwhile, make up a larger proportion of available vehicles today.
Similar to the brand dynamics that are playing out, it is noted that mid-size and small sedans have the highest Inventory Efficiency Index scores of any segment. This points to opportunities for OEMs to take a second look at these market sectors and consider increasing supply to better balance with demand.
In sum, inventory levels are rebounding and are approaching levels we have not seen in several years, but profound shifts have occurred in the interim. Or said another way…the more things stay the same, the more they change.
