Differences Point to Need for Prioritization in Marketing and Incentive Allocations
At Cloud Theory, we have written extensively about an unusual supply and demand dynamic that has been occurring in the automotive marketplace over the past year. In our recent 2024 Year in Review and 2025 Outlook Report, we noted the steady rise in inventory—almost to pre-pandemic levels—without a commensurate increase in vehicle movement. Additionally, we have seen turn rates erode and days-to-move increase.
The one metric that would normally accompany such shifts is a decline in marketed pricing, but levels stubbornly remained very near $50,000 throughout 2024 and into the early days of 2025. When we wrote our year-end report, we pointed to a variety of factors that contributed to this anomaly—general inflation, the discontinuation of lower-end/lower-priced models during the recent inventory shortage era, and a focus on higher profit models and trims by the OEMs. These factors have collectively kept prices elevated on a national basis.
On a more granular geographical basis, however, there are distinct regional differences with clear-cut contributing factors. As is just about always true in our industry, there is not a one-size-fits-all approach to the marketplace, and the actions taken should therefore be guided by more focused data and insights.
Consider, for example, the state-level pricing pattern in the United States. The regional differences could not be more conspicuous. States with marketed prices $1,500+ higher than the national average are generally in the upper Mountain states, while those with prices $1,500+ lower than average are in the upper Midwest and Northeast.
The segment drivers of these disparities could not be more clear-cut either. Higher priced states (excluding California) are heavily truck-oriented, with prices in those segments at well above $50,000 pulling the overall average upward. In California, meanwhile, it is the luxury orientation of the market that is key to that state’s elevated values.
In the lower priced states, on the other hand, Midsize and Small SUVs account for a higher percentage of vehicle movement, pushing values down overall.
Regional trends indicate that this difference is growing over time, with higher priced states starting the year $3,176 above the lower priced areas, and levels remaining largely unchanged from the beginning of 2024 to the start of 2025. Lower priced states, meanwhile, saw reductions of $849—resulting in current month gaps of almost $4,000. It is noted that the prices are even more elevated in California, and remained steady when comparing January 2025 to January 2024.
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Our year-end report remarked upon the “sticker shock” that consumers who are coming back into the market are facing, particularly at the middle and lower end of the socioeconomic scale. Strategies to combat that sentiment should take precedence in the higher-priced areas, with a greater marketing emphasis and allocation of incentives considered.
Taking such actions and making such decisions are dependent on detailed, granular, and real-time information, and a user-friendly data resource to access it. Cloud Theory’s Horizon platform provides exactly that.
Find out how we can help you utilize these insights by getting a demo today!
