Black Book analysts believe the automotive industry may be heading toward an over-production issue with smaller cars. There are more manufacturers producing a higher volume of cars, yet overall consumer demand has not matched this production. Consider the following data points from Black Book, which indicate falling retention values for smaller cars in comparison to other segments:
- Smaller-car prices have seen larger price drops than other car segments. Entry-level car prices on the wholesale market have dropped -4.1% since August 24, compared with a -3.6% price drop for all car segments combined. Cars in this category include the Chevrolet Aveo, Honda Fit, Nissan Versa and Toyota Yaris.
- Compact car prices have also dropped more than overall car segments, with values in this category declining -4.9% since August 24. Cars in this segment include Honda Civic, Chevrolet Cobalt, Toyota Corolla, Chevrolet Cruze, Ford Fiesta, Ford Focus, and Mazda3. Truck segments have declined just -2.2% during the same time.
- Manufacturers have introduced more small cars to meet the demands of rising CAFÉ standards. Black Book believes there could be over-production issues in the near future. As an example, whereas there used to be 4-5 manufacturers for the category, today there are closer to 10 manufacturers, and category demand so far has not matched this production.
- As a comparison, the Chevrolet Suburban had a 12-month retention value of 80% in the late 1990s. When the Ford Expedition was launched, with an additional 200,000 units flooding the category, the Suburban’s retention level fell into the mid 60% range.
“Even though the smaller cars are built with higher quality and more features than in years past, there are more options for the consumer today,” said Ricky Beggs, Senior Analyst at Black Book. “While gas prices have come down from their late-summer highs, we didn’t see the rush toward small cars because people have become immune to higher gas prices and there is better fuel economy in the larger vehicles.”
About Black Book
In business since 1955, Black Book is a provider of accurate pricing insight, mobile solutions and online vehicle trade-in valuation for the automotive industry. The company offers the industry’s most accurate vehicle valuation insight to dealers, lenders, remarketers and government agencies. Black Book also provides automotive shoppers with instant and accurate credit-score estimates and trade-in appraisals, which provide the highest quality sales leads for dealers. Click here to view Ricky Beggs’ weekly video series offering the latest insight in the auto market http://ow.ly/aHFD6. Follow Ricky on Twitter @BeggsBlackBook (https://twitter.com/
