Cars are starting to pile up on dealership lots
If you’ve passed by a dealership recently, you may have noticed quite a large accumulation of automobiles. While it’s not uncommon to see cars parked out on the lawn in front of dealers, a new report suggests that this collection of unsold cars is reaching an unhealthy level for dealerships.
By the end of last month, a total of 3.95 million vehicles sat out on dealership lots.
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For comparison, that inventory is 4 percent higher than the number of vehicles out on dealership lots at the start of January. It’s also 3 percent higher than the inventory at the end of January during 2018.
Dealerships are starting the year off with more unsold vehicles than they had three years ago. At that time, auto sales peaked at 17.55 million for the year.
This year, U.S. auto sales may not even surpass 17 million vehicles. That will be the first time the industry has failed to meet that benchmark since 2014.
Passenger cars are responsible for much of the buildup
Across the industry, U.S. auto sales were down roughly 1 percent compared to the prior January. However, not every segment was affected equally. As more drivers move away from passenger cars, sales for the segment have fallen 4 percent.
The auto industry has already employed a number of tactics to counteract falling sales. Last year, many brands relied heavily on rental car purchases to boost sales, which ultimately yield less profit.
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Still, automakers faced quite a few challenges in January. Much of the country was affected by a lengthy polar vortex, while the U.S. Government was also shut down for most of the month.
Dealerships will have to pick up the sales pace if they want to make up for January’s buildup. Otherwise, their excess inventory might become more than they can handle.
News Source: The Wall Street Journal
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