This Week in Car Buying: Inventory tight as holiday sales events kick off; Sales near peak; Volvo's virtual test drive; Chevy Cruze priced; Cadillac Escalade pushed
As we head into the holiday event selling season, automakers have tight inventories, so while there are incentives and lease programs galore, additional discounts may be hard to come by. According to Automotive News, the total industry days' supply stands at 69, down from last year's levels of 76. The days' supply is the number of days it would take at the current sales rate to retail all vehicles in stock.
Usually, inventories climb after October, which is a traditionally strong month as a result of the start of the new model year. Inventories have increased somewhat, but by about a half over year ago levels. This reflects a discipline on the part of manufacturers not to overproduce vehicles which could lead to expensive incentives to move product. Even though the days' supply is at 69, some 9 days more than the ideal industry average of 60, the 10-year average for Nov. 1 is 73 days, Automotive News reports.
Alan Batey, global senior vice president of Chevrolet, said "we will adjust [production] accordingly to protect the brand." Recently, GM reduced its workforce by 500 and cut back production of the subcompact Chevy Sonic in response to soft sales. "It demonstrates the discipline in our marketing program," adding that the division is below industry averages on spiffs. "We've outperformed the market and have had seven months of sales and share gains."
Have sales peaked?
With the seasonally adjusted annual sales rate running at 18 million vehicles, the chief economist for the National Automotive Dealers Association said that pent up demand may soon be met resulting in slowing sales. According to Steven Szakaly, total sales could hit 17.6 million in 2016 and then drop to 17.2 million in 2017. He cites such factors as low gas prices, an increase in households and employment growth, have contributed to 2016's strong sales.
However, he believes that higher fuel economy standards, rising interest rates and stagnant wages could contribute to a softening in the market. And while the industry is working hard to keep production and incentives in check, the pressure to chase market share and volume could spark incentives wars as sales decline. However, booming new car sales also means that the supply of used cars will continue to grow over the next few years opening opportunities for first time buyers.
"When you consider low wage growth and the fact that we're going to have a lot of Gen Y buyers coming into the market that might not have really high incomes, the pool of used vehicles should be very attractive for those buyers from a price point," said Jonathan Banks, vice president of valuation and analytics for J.D. Power. Banks indicated that 1.9-percent increase in used vehicles in 2015 the first gain in supply since the 2008 recession.
Volvo's Virtual Test Drive
Volvo is teaming with Microsoft to develop hologram technology that would allow prospects to explore safety and infotainment features as well as virtually test drive a car, according to a Bloomberg report. Using Microsoft's HoloLens augmented-reality goggles, Volvo recently displayed images of its upcoming S90 flagship during a demonstration at Microsoft's Redmond, Washington, headquarters.
"The opportunity with mixed reality is you can get under the skin of the car," said Thomas Andersson, vice president of Volvo's global marketing. "It's a much richer experience with more texture to it."
Volvo says the technology is useful in showing off safety features such as automatic braking for collision avoidance and other situations that would be difficult or impossible to replicate in actual test drives. It's also designed as a way to showcase semi-autonomous driving features of future new models.
2016 Chevrolet Cruze priced
Chevrolet has announced pricing on its redesigned 2016 Chevrolet Cruze, which is set to go on sale next spring. The larger, lighter and roomier Cruze, which will have two inches more rear knee room, will start at $17,495 for the base L model equipped with a 6-speed manual transmission. The LS models start at $18,995 with the manual and $19,995 for the automatic. The LT automatic is priced at $21,995 and the range topping Premiere automatic $23,995. All prices include $875 destination.
Powered by a 153-horsepower 1.4-liter turbocharged 4-cylinder engine, the base 2016 Chevrolet Cruze L is priced $570 below the 2015 Toyota Corolla L, $580 less than a 2016 Hyundai Elantra SE and $980 less than a 2016 Honda Civic LX.
Cadillac gives Escalade a boost
Since its redesign 18 months ago, Cadillac hasn't had to do much marketing of its range topping Escalade. Customers have been lining up to pay nearly full list for the Escalade since its first makeover in 8 years. Average transaction prices for the Escalade have ranged above $80,000, up from $69,000 for the previous model, according to Automotive News. Sales grew 48 percent during the 2015 Escalade's first year on the market and currently are running 20 percent ahead of last year.
Still, Cadillac is looking to keep the pot on the boil by launching the first ad campaign for the vehicle during the holiday sales event season. The thrust of the ads will be to stress the precision luxury crafting of the interior and overall refinement of the full-size SUV. "The Escalade doesn't have an awareness problem whatsoever," said Cadillac global marketing director Uwe Ellinghaus in explaining the program. "What people aren't aware of is how good the interior is. We will feature that prominently."
The much anticipated launch of the all-new 2016 Toyota Prius is underway. Check out our reaction in a first review drive.
The expected debut of the redesigned 2017 Buick LaCrosse wasn't a surprise, but the new shape is pleasing nonetheless. The new car is expected to go on sale next summer.
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