Automakers have sent retailers enough new vehicles to restore a 30-day supply to three major publicly traded auto groups, according to first-quarter earnings results.
Sonic Automotive Inc. President Jeff Dyke told investors on a recent quarterly earnings call that “new-car inventory is building.” As it builds, auto groups are seeing a need for increased incentive spending and discounts for well-stocked vehicles below MSRP.
Despite days’ inventory improvements, public auto groups report some brands, especially Toyota, are still struggling to keep up with demand.
"As we look to May, the asymmetrical market positions of each manufacturer could become more apparent," Thomas King, president of J.D. Power data and analytics, reported in a press release. "Brands with higher inventory levels may participate in the tradition of Memorial Day promotions and discounts to generate sales, while other brands that are still struggling with production will have to decide whether or not to compete on price."”
Asbury Automotive Group Inc.
In the first quarter, Asbury Automotive Group had 30 days of new-vehicle inventory, an increase from the 10-day supply it had in March 2022 and a bit more than the 26 days it had in the fourth quarter of 2022.
Asbury still has a significant lack of vehicles for some brands, CEO David Hult noted during a recent earnings call. Dan Clara, Asbury's senior vice president of operations, said the group had a 63-day supply of domestic vehicles, yet only 18 days for imports.
Asbury's days' supply of Toyota, its No. 1 brand, remained in the single digits. The group had only a small quantity of Honda cars for most of the first quarter, but Hult noted days’ supply increased to the mid-teens by the end.
Asbury also reported over a 60-day supply of vehicles from Stellantis, its No. 2 brand, Hult said. Stellantis sales were hampered by "overly supplied trucks," incentives that were still "not yet at their peak" and stop-sale orders, he said.
Asbury sold vehicles with single-digit days' supply at sticker price but discounted those with greater than a 40-day supply.
AutoNation Inc. reported a 25-day supply of new-vehicle inventory compared to eight days for the same period in 2022 and 19 days in the fourth quarter of 2022.
CEO Mike Manley, who spoke on AutoNation's first-quarter earnings call, pointed out that industry inventory for new vehicles remains below historical levels.
Manley predicted that the cost of items will adjust as supply chains and production levels return to normal.
"We expect as more inventory comes into the marketplace and we continue to see higher monthly payments, it will continue … to mitigate throughout the year," he said.
Group 1 Automotive
Group 1 Automotive Inc. recorded a 27-day new-vehicle inventory supply in the first quarter, compared to 21 days at the end of 2022 and just nine days in March 2022.
"Inventory is higher in our domestic brands [though] import brands remained fairly constrained," CEO Daryl Kenningham reported in a recent earnings call. He noted that supplies of Toyota and Lexus vehicles remain "very tight," at a combined five-day supply.
Lithia Motors reported a 52-day supply of new vehicles as of March 31, up from 47 days in December and 27 days in March 2022.
On a recent earnings call, COO Chris Holzshu reported improved inventory availability. He didn't give details but noted several automakers have not increased consumer incentives to meet retail demand.
"When you look at finance incentives, they're still 50% of what they were two years ago," he said. "And when you see that we have inventory on the ground right now—especially in the domestic lines—that is not moving, our day supply is building. And [if] you look at the fleet business, which was up 60% in the quarter, you start to see that there's a timing of when incentives are definitely going to flow back to the consumers, which is going to help us drive more retail."
Penske Automotive Group
According to Penske Automotive Group, the U.S. had 22 days of new-vehicle supply at the end of the first quarter, higher than the 18 days at the end of December and nine days in the first quarter of 2022.
"Our days' supply, when you look at it, is very, very low," CEO Roger Penske said on a recent earnings call.
Supply of the group’s No. 1 brand, BMW, stood at 14 days, Penske reported. The group's inventory of Toyota vehicles was in the single digits, he said.
At the beginning of the year, Sonic franchise dealers held a 31-day supply of new vehicles, compared to 15 days of stock a year before. Sonic had a 24-day supply during the fourth quarter.
Dyke reported new-vehicle inventory has moved from a 20-day supply to a 30-day supply on average for Sonic and other retailers.
"We expect that to continue," he said. He stated automakers will not sustain supply in the 25- to 30-day range but closer to 40 days.
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