Cox Automotive’s Charlie Chesbrough reveals forecast for Q4 and how car dealers can prepare

The shortage of new vehicle inventory has led to a decline in sales and an uptick in stress for many of you. Cox Automotive is reporting that August was the fourth consecutive month of slowing sales for new vehicles. On today’s show, we’re pleased to welcome Charlie Chesbrough, Senior Economist and Senior Director of Industry Insights at Cox Automotive to walk us through what is happening and how dealers are responding in the Q3 Cox Automotive Dealer Sentiment Index.

With August behind us, Chesbrough says one of the positive take-ways is that there is still interest from consumers for vehicles. Demand remains high for both new and used. It’s just market constraints on the supply side. Chesbrough says what dealers need to get ready for, is that the problem isn’t going away anytime soon.

The sales pace we saw in August was 13.1 million, far below what we expected for a 17 million market says Chesbrough. You’re going to have a difficult time if you’re a picky buyer out there trying to find exactly what you want. Chesbrough says he’s finding that successful dealers are able to get their customers to order their vehicles. He thinks as the products start to come back in, he’s see the consumers coming back to buying vehicles because they’re going to want them.

There is no end in sight with the chip shortage, unfortunately. Chesbrough says it’s a very fluid environment right now. He thinks those that were hit early, they may be able to catch up a little bit. Those that haven’t been hit so hard yet are going to start to see it in Q3 into Q4.

Chesbrough says the only guidance he can really give dealers right now is that there is strong demand out there but it’s going to be constrained by what the manufacturer can actually produce. Currently, there are about 1 million vehicles sitting on lots, but 5 million more is needed throughout the rest of this year.

The industry has been operating with tight inventory for more than a year now. I think the industry is going through a transformation says, Chesbrough. He believes it’s going to be more vehicle ordering with incentives going towards online ordering. Those who are patient will be able to get a better price.

Chesbrough wraps up the conversation by giving his prediction for Q4. He says we’re looking at a very tight inventory environment. He says he wouldn’t be surprised if we see the SAAR become lower this month. Dealers have to be prepared that margins are going to remain strong but volumes are going to be challenged.

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