Today on CBT News, host Jim Fitzpatrick is joined by Charlie Chesbrough, Senior Economist and Senior Director of Industry Insights at Cox Automotive. Chesbrough joins the show to recap results from the first quarter of 2021, and provide insight on what car dealers can expect for the rest of the year.
To gain a true understanding of the automotive market’s performance in the first quarter of 2021, one would have to compare results from 2019. Due to lockdowns caused by the COVID-19 pandemic, Q1 from 2020 is an inaccurate representation of the normal state of the market. Chesbrough says that comparisons with the 2019 market show that the industry is almost back to normal levels.
Chesbrough says the market is on the comeback as demand remains high. The new concern for car dealers is having enough inventory to meet demand. Q1 results have shown that auto sales have carried over momentum from rising levels in the back half of 2020.
With new-vehicle inventory low, many consumers have shifted their focus to the used-car market. Chesbrough says that Cox Automotive research expects demand in the used-car market to rise for the next few months. However, many consumers will be shocked by price tags as used-vehicle prices are rising to historically high levels. Car dealers will also be able to hold prices during negotiations of used vehicles due to the high demand.
As prices for both new and used vehicles remain high, Chesbrough believes that car dealers could see an increase in fixed-ops revenue. Demand is likely to stabilize as more consumers are vaccinated and stimulus money is spent. Yet prices could remain high due to a lack of supply. This will lead many vehicle owners to invest in their current automobile instead of purchasing a new one.
