No one reading this should be surprised by the news it’s more expensive than ever to find one’s way into a new car. All kinds of external forces have driven average purchase prices through the roof, and strife halfway around the world is currently playing a role in driving up the cost of fuel.
CEOs of the world’s automotive companies have taken note, of course. Late last week, during a virtual roundtable discussion with industry wonks, Stellantis boss Carlos Tavares expressed his opinions on the matter – and spoke of his concerns.
According to The Detroit Bureau, Tavares says he is very concerned “about the effect of affordability” as it relates to the auto industry, going on to opine how the situation may worsen as inflationary pressures escalate around the globe. Production cuts, which began two years ago when factories temporarily shuttered at the beginning of the pandemic but were then acerbated by a lack of semiconductor chips and other supply chain problems, have created severe inventory shortages – an issue whose impact on affordability has been covered multiple times on these digital pages.
An interesting stat tossed out by Tavares was the estimation that there are barely 1 million vehicles sitting in worldwide dealer inventory as this is being written in early March. That’s about one-third of what’s considered normal for this time of year, apparently. We’ve reached out to a few dealer contacts to gauge the accuracy of this estimation in this neck of the woods. To be sure, most lots around these parts are emptier than a politician’s soul.
The explosion of cost for raw materials also doesn’t help. Aluminum has apparently jumped about $1,000 per ton since just before Christmas, and per-ton nickel prices have reportedly increased by approximately 10 grand in the last few months. These essentials are used in bulk for vehicle production – and have no small impact on thwarting the efforts of an OEM to achieve EV price parity with gasoline-powered vehicles. The latter was referenced by Tavares during last week’s roundtable, in which he explained car companies will need to fandangle their way through creative cost containment so these price hikes are not wholly passed on to customers. Doing so, he said, would create a market in which “the middle classes would not be able to buy new cars.”
Suffice it to say those at the helm of car manufacturers don’t expect this tough situation to ease up any time soon. In a separate conversation late last month, Tavares also said he expects Stellantis suppliers to eat some of these costs in an effort to prevent runaway prices on EVs, saying the current climate should provide “a very nice Darwinian transition period” for suppliers and OEMs.
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I think Carlos is the new Sergio, may the latter rest in peace.
“Tavares also said he expects Stellantis suppliers to eat some of these costs”
No surprise here, both were hired to cut costs.
Well, this Carlos is a protege of the other Carlos over in Lebanon, so no surprise there.
No mention that at least here in America manufactures moved away from small cars to more profitable trucks and SUVs.
The only product Tavares’s company makes that is relevant to me right now is the Pacifica Hybrid.
The only Pacifica Hybrid Pinnacle currently available in my part of the country has a $5K ADM sitting on it. That’s bad even in this price bracket and would be much worse if I were looking for a Voyager.
Yes, he’s right to be concerned.
I bought mine 10.5 months ago with $5K cash on the hood plus a $750 dealer discount. That plus the $7500 tax credit (which I was able to take fully) made it nice.
Currently, though, the sticker price has gone up at least $2K, maybe $3K (it’s a floating number), then there’s the ADM, plus the lack of cash on the hood, all of which makes it $13,000 more expensive today than 10.5 months ago. And on top of that, it’s decontented due to the chip shortage. (You know those folding mirrors and tripane sunroof and disc player you’d pay a few grand more for? The sticker shows a nice $210 discount for not having those things anymore.)
Great car. But not at that price. $13K buys a lot of gas, even at four bucks a gallon.
They took away the folding mirrors? No sale.
I knew the third pane of the sunroof had gone away but I could live with that. But I live in a damn city and folding mirrors are something that’s useful every day.
Maybe affordable, smaller cars will make a come back? Or maybe eliminate the $5k markup from the middle man dealers? I just assume the answer will arrive as soon as we can order Chinese cars from Amazon.
I keep saying, bring back (and rebadge) Suzukis – there are plenty of them, they are cheap, the quality is good and now is the perfect time to re-introduce economy cars. A good, comfortable, safe, economical, reliable car for under twenty grand will be a huge hit. And bring back the Colt, while you’re at it. “RAM Colt” does sound a bit weird, though…
If you keep putting more stuff in cars they’re going to be more expensive…
EBFD, ABS, TCS, ESC, an 8″ touch screen with a backup camera, HD Radio, satellite radio, Bluetooth, power windows, power locks, push button start with smart key, automatic emergency braking, dual zone climate control, lane keep, adaptive cruise control, air conditioning, six airbags, rear occupant warning, hill start control, tire pressure monitoring, child safety seat latch, driver attention assist, etc… cost money.
You can get all of that on a Kia Rio. That’s like more tech than a 2005 S-Class would have.
On the one hand even the shittiest cars are pretty good now, or at least full of tech, but on the other hand there is now no cheap new car.
But is that a problem? Just buy a used car. What’s the point of buying a new car with rollup windows and no A/C (that they don’t even make anymore) over just buying the same car with 10-20k miles on it with A/C?
Eventually those cheap used cars with roll up windows and no air will completely disappear (they will be scrapped and made into washing machines made in China). When more large sized loaded trucks, suvs, and crossovers are being made than small cars that eventually will become tomorrows used vehicles. There is no guarantee of inexpensive used vehicles but the Chinese could make new vehicles more affordable.
People would rather finance a RAV4 or a F150 on a 72 months loan that they cannot afford then being seen in a Kia Rio or a Mitsubishi Mirage that would be a more practical choice. Not the automakers’ fault that the Americans are all about want want want.
People will fiance until they no longer qualify. There is a point where some have overextended themselves and might have to get what they can afford. A Kia Rio or a Mitsubishi Mirage can be a good choice if there are few other choices available. Wants and needs are not always the same. There are also others who would rather live within their means.
@grayone: “On the one hand even the shittiest cars are pretty good now, or at least full of tech, but on the other hand there is now no cheap new car.”
I think you’re not taking inflation into consideration. A Honda Civic cost about $5600 in 1982, and had crank windows, no A/C, and no radio. That’s about $16-17,000 in today’s money, which is the base price for a new Kia Rio, and that car comes with A/C, power windows and locks, and a ton of safety equipment.
So car pricing isn’t really that different. The change is in disposable income.
The affordability problem has been brewing for years-and it just took the “world situation” to accelerate it. Maybe there is an upside-that it will be addressed…one can only hope.
The mfrs don’t care about vehicle affordability by the middle or low classes as long as margins remain high. Mr Tavares’ concern is feigned.
The recent supply-demand pinch has provided a unique opportunity for mfrs to see that they can still be profitable by selling fewer cars to the “haves”. It’s an experiment that no mfr could perform on their own under normal circumstances, but the market provided a fortuitous laboratory for everyone to become more profitable.
With material and labor costs rising so fast, don’t hold your breath waiting for ‘affordable’ cars to arrive for the little people. There is no incentive to break even or lose money on them, especially when the market demands bigger, faster vehicles with more features that the 20-percenters are willing to buy.
Agree about the affordability and many manufacturers don’t seem to care but when the generations that are coming of age can barely afford a 20 year old Toyota Corolla or Honda Civic there is a real problem. The CEOs and the board are making ever higher compensation which true is not a major percentage of the cost of producing a new car but it still is a cost. The vehicles need to have less electronics and less overall features but then again the manufacturers want to make the vehicles with the largest profit margin. The only problem with this is that it is hard to build any customer loyalty with the future generations if they cannot afford to buy your new vehicle to begin with. Unfortunately it might take the Chinese to come into our market and flood it with less expensive EVs. Noticed I said EVs and not ICE because it is more expensive for the Chinese to make EVs than ICE and the Chinese have been making them longer than most of our manufactures with the exception of Tesla. Car prices keep going up whether its new or used and I just had an offer of 4k more than what I paid for my 2012 Buick Lacrosse E-Assist than what I paid for it 2 1/2 years ago. I am going to take that offer and I am sure my pristine Lacrosse with just 48k miles will sell fairly quick.
I meant it is more expensive for the Chinese to make ICE vehicles than EVs.
Check out the latest news on Tavares’ compensation:
https://europe.autonews.com/blogs/why-stellantis-tavares-poised-be-best-paid-auto-boss-europe-while
Mary Barra makes more in 1 year than Tavares does in 5 and but at least Tavares earns his pay.
She has much fancier fingernails than he does, though.
Beware women who waste money on garish fingernails. They think guys like them. We don’t. We also don’t care about their shoes, handbags or ridiculous fake eyelashes.
Materials prices going up affects more than cars, it affects money itself.
Nickel has gone up even more dramatically than $10,000/tonne. Six months ago, it was $20,000/Tonne, and it’s now $52,700/Tonne.
A nickel coin is 25% nickel, the rest being copper. That’s 1.25 grams of nickel in every coin. At $20K there was 2.5 cents worth, but at $52.7K the nickel alone is nearly 5.3 cents worth.
The high price of copper has resulted in the cost of the mint producing nickels for slightly more than face value. If the price of nickel doesn’t drop, we could see our nickels (and dimes and quarters, all made of cupronickel) made of stainless instead.
At least stainless coins would not tarnish as much. I wonder since they are still making pennies why they don’t just make them out of steel instead of copper like they did for 1 year in 1943. If people insist on keeping the penny at least make it out of less expensive material.
Or we could do like the Asians do – make coins with a hole in the middle. Same value, less metal, and you can fashion a drain plug washer out of one, or make a necklace from a bunch of them.
For reasons such as marketing, cultural attitudes, whatever, people demand bigger, more complex, vehicles with excessive capabilities that are rarely if ever utilized. Want a sales failure in the USA? Offer a practical, simple, highly competent vehicle gets the basics right: ride, performance, reliability, affordability, and comfort with few bells and whistles. One that Consumer’s Reports would highly recommend. FLOP! Car buying is emotional. Rational vehicles have little appeal.
The Maverick comes the closest of any new vehicle currently on the market and it has more demand than actual product. I am not sure about Consumer Reports since they mostly recommend Toyota.
Tavares and other industry leaders are always bottom-line focused. That’s the way of business no matter what is being made and/or sold. I see that these captains of the industry with their focus on the top-line, optioned-up vehicles carrying a higher profit margin as serving their main customers – the dealerships – with higher profit vehicles to sell. It’s not as if this situation is anything new – low profit “crank window without A/C” vehicles have been scarce on the lots for many years before the current shortage caused by (insert your favorite reason or guilty party here)- most dealerships hated these low-profits in the inventory except as seeds to bring in folks to upsell. The folks at the top of both the manufacturers and dealerships are concerned about the travails of the proles all the way to the bank. Locally, over in Springfield, someone just purchase a new Grand Wagoneer for $125,000 cash (including the very significant ADM). There are definitely folks out there with the wherewithal to scoop up the available new hi-zoot stuff just as soon as it comes down the ramp from the carrier. This same multi-vehicle dealership (Stellantis/Chevrolet/Kia/Hyundai) currently does not have and haven’t had any new vehicles less than the top line models fully optioned in stock for the last 8 or 9 months. The local BHPHs are doing land office business in recycling repos and clunkers to the proles without sufficient means to purchase new. The prole cohort will be getting larger as the pricing continues to rise and less folks will be financially able to get that “new car smell” that they crave.
$125000 for a Jeep…good Lord, that’s nutty. There’s so much pent up cash out there right now, chasing too few products. That’s why we have all this inflation.
I think that’s all about to come crashing down.
If I could buy and plate a Mahindra Roxor here in Alberta I’d be fine with that for 100% of my commuting. The gas-guzzlers could stay parked until I need to haul/tow or heel/toe.
I have known people that did just that to save their larger less efficient vehicle for towing and hauling and buying a smaller more efficient and affordable vehicle.
Careful. You still want US DOT or ECE crash standards….there’s always “the other guy”.
Sorry for my ignorance but what is ADM?
Googling the term one finds anything from “Archer Daniels Midland” to the gamut of “average daily membership” to “adaptive delta modulation”.
Now might be the time to come up with Imperial as a stand-alone brand, maybe with a label in the engine compartment that it is “by Stellantis” No more “Chrysler Imperial” could give the brand more cachet.
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