Metro East Sun

The days of purchasing a brand new vehicle for under $20,000 in the United States are dwindling. The average price of a new vehicle has skyrocketed to over $48,000, marking a significant 25 percent increase since the beginning of the COVID-19 pandemic in March 2020. Surprisingly, only one vehicle, the Mitsubishi Mirage, is currently available for less than $20,000. However, sales of the Mirage have been lackluster, experiencing a decline of 44 percent this year. There are even rumors suggesting that Mitsubishi may cease selling the Mirage by the mid-2020s.

The most affordable vehicle offered by an American brand at present is the 2024 Chevy Trax SUV, priced at $21,500. Other vehicles, such as the Kia Rio and Nissan Versa, hover around the $20,000 mark. Nevertheless, automakers seem to be following a trend of discontinuing or reducing the production of their cheapest vehicles, indicating that these models may not remain under or at $20,000 for much longer.

The automotive industry faced a major setback due to a pandemic-related computer chip shortage, resulting in a significant decrease in global auto production. This shortage caused a sudden scarcity of vehicles during a period of high demand, leading to a significant price surge. Automakers prioritized the production of their most profitable cars, with Nissan, for example, increasing the production of expensive vehicles like the Altima and Pathfinder. Conversely, production of Nissan's cheaper models, such as the Versa, was slashed by 78 percent. The Sentra and Kicks models also experienced reduced production. Additionally, the used car market faced a shortage of supply as consumers flocked to it, causing prices to rise substantially.

Fortunately, there have been some positive developments for automobile shoppers this year. The average price of a new vehicle has actually decreased by $865 from January to June 2023, bringing the average price down to $48,808. The industry was previously grappling with soaring inflation, as one executive analyst aptly described it. The availability of new vehicle inventory has also increased, rising from 1.75 million in January to 1.95 million in June. Several major brands, including Tesla and Land Rover, have witnessed a decline in average transaction prices for the first six months of 2023. Notably, Tesla's prices have dropped by over $7,000, while Land Rover's have decreased by just under $7,000. Other brands, such as Lincoln, Volvo, Mercedes-Benz, Fiat, Volkswagen, Buick, Polestar, and Nissan, have also experienced price reductions.

Encouragingly, the electric vehicle (EV) industry is showing positive signs as well. The supply of EVs has increased, leading to a decline in prices. In June, the average transaction price for an EV was $53,400, down from over $61,000 in January. Automakers are ramping up their incentive spending, and dealerships are offering larger discounts off sticker prices to attract buyers. Compared to the same period last year, new vehicle prices have only risen by 1.6 percent over the past 12 months, a significant drop from the 12.4 percent year-to-year increase seen previously.

While the days of purchasing a new vehicle for under $20,000 may be fading, there are signs of a slow rebound in the auto industry. The average price of new vehicles has experienced a slight decline, and there is a greater availability of inventory. Additionally, the electric vehicle sector is witnessing increased supply and more affordable prices. However, it remains to be seen whether these positive trends will continue in the coming months.

Click this link to access more information: https://repelik.com/2023/12/11/the-days-of-the-20000-new-vehicle-may-be-over-but-is-the-auto-industry-slowly-rebounding/