Inexpensive Automotive Notice: Sub-$30,000 Vehicles Potentially Disappearing from Inventory
In the first quarter of 2025, the average number of "days live" for new vehicles on dealership lots stood at 78 days, a figure reminiscent of pre-pandemic levels from the same period in 2019. However, the current market landscape presents unique challenges for dealers, particularly when it comes to affordable vehicles.
A recent survey by Cars Commerce has revealed a significant mismatch between dealers' understanding of where cars are built and the reality. This misconception, coupled with the lack of knowledge about the country of final assembly, can potentially lead to confusion about tariffs.
The survey found that a staggering 89% of sub-$30,000 vehicles are produced outside of the U.S., with the most affordable vehicles primarily imported, mainly from Mexico. This trend is concerning for dealers, especially those who sell brands offering these cars.
The Trump Administration's imposition of 25% tariffs on vehicle imports, including those from Mexico and Canada, has further complicated the situation. Knowing the country of final assembly can assist with tariff-related discussions, helping dealers make informed decisions about their inventory.
Unfortunately, dealers are facing a dwindling supply of sub-$30,000 vehicles. These vehicles account for only 14% of inventory, a significant decrease from previous years. The report finds that only 23 vehicle models are priced under $30,000.
The brands offering cars under $30,000 and their final assembly countries vary. For instance, Volkswagen assembles certain models like the ID.2 and Cupra Raval in Martorell, Spain, while Ford produces lower-cost electric vehicles in Louisville, USA. The specific brand and assembly locations depend on the model and manufacturer strategies.
It's important to note that not all domestic brand vehicles are finally assembled in the U.S. Vehicles assembled in U.S. factories have a higher average price compared to imports.
The prolonged stay of new vehicles on dealership lots before being sold has also become a concern. New cars are spending 20% longer on dealership lots before being sold compared to a year ago. After 30 days, a vehicle becomes stale and starts to cost money, indicating the need for dealers to start discounting.
In the first week of April, the average price of a new car from Mexico was $12,580 less expensive than an American-made car. This price difference underscores the importance of dealers managing their inventory more tightly during changing market conditions.
In conclusion, the current market conditions require dealers to be more vigilant and strategic when it comes to their inventory of affordable vehicles. Understanding the country of final assembly can help dealers navigate tariff discussions and make informed decisions about their inventory.