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Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here. |
Today's bonus section is a very brief auto-market update. Perhaps no market was more affected by the pandemic than the car market. Supply chain issues gave way to outrageous dealer markups, while employment retention credits translated to $200,000 market adjustments for G-Wagons. The car market experienced it all. Fast-forward to 2024, and the market is normalizing, with manufacturers losing pricing power for various reasons—good news for consumers.
Cox Automotive published their market days supply data for March. This metric represents the number of days it would take a manufacturer to sell all inventory at current sales rates. The national average stands at 76 days, just above the optimum target of 75 days. However, only nine manufacturers, including Honda, Toyota, Lexus, BMW, and Subaru, are below that level. Twenty-one manufacturers are carrying much more inventory than the 76-day average, with Lincoln, Genesis, Volvo averaging well above 120 days' supply, and Ram, Chrysler, Jeep, and Dodge carrying at least double the national average. Notably, even the car market is bifurcated – the Range Rover Sport is almost impossible to find with a 23-day supply, while the Ford Mach-E, an economy electric car, has a 225-day supply with huge dealer incentives. Used car inventory remains problematic, with approximately 10 million new cars not built during the chip shortage.
Electric car manufacturers face serious pricing power headwinds. Demand has slowed as automakers build more EVs than ever, with increasing competition driven by ZEV (Zero Emissions Vehicle) mandates. The UK, for instance, has moved its ban on ICE vehicles from 2030 to 2035, but manufacturers must meet interim ZEV sales targets – 28% by 2025, 52% by 2028, 80% in 2030, and 100% in 2035 – or face fines of £15,000 per non-compliant vehicle sold. These mandates have pulled substantial competition into the EV market as manufacturers rush to produce affordable electric vehicles. Tesla cut the Model Y's cost by $10,000 last year, while BYD, now the world's largest EV maker, can sell its Dolphin model for $17,000 in China thanks to cheap battery manufacturing. The market is changing, largely benefiting consumers but forcing tough decisions for automakers.
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Learn more about the Market Situation Report written by Tier 1 Alpha. |
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