This Week in Car Buying: Production slows; BMW Prices 5 Series; VW settles V6 diesel case; Big trucks, big bucks
Even as the industry rolls to another near record year in sales, increasing new and used vehicle inventories are beginning to be felt causing the Detroit 3 manufacturers to throttle back on production. As we reported earlier, inventories of new vehicles are nearly at 4 million units. Likewise supplies of late model used cars are also climbing, which is putting pressure on new car sales, keeping a lid on pricing and forcing higher incentives to clear out stocks.
As a result of this glut, General Motors, Ford and Fiat Chrysler Automobiles have all announced plans to cut back production in an effort to thin stocks. While current year-end incentive programs are generous, if manufacturers are able to align their build schedules more closely with actual demand, expect the incentives to decrease or disappear on some models altogether.
This means that if you’re looking for a new vehicle, you may want to take advantage of current holiday sales events. The other strategy would be to shop for a late-model used car during the first quarter since those cars are already built and aren’t going anywhere. There’s likely to be deals to be had on Certified Pre-Owned and other used vehicles throughout 2017 as the market seeks to absorb off-lease cars returning to lots as a result of leasing having hit record levels of more than 30 percent of all transactions.
Beginning in January, GM will idle its Detroit-Hamtramck assembly plant for three weeks in an effort to reduce supplies of the Chevrolet Volt, Cadillac CT6, Chevrolet Impala and Buick LaCrosse models. It has also announced the elimination of third shifts at its Lansing Grand River plant in Michigan and Lordstown in Ohio, furloughing more than 2,000 workers. The former builds Chevrolet Camaro and Cadillac ATS and CTS models, the latter is the site for the compact Chevrolet Cruze.
Ford will close its Kansas City assembly plant in January for a week, which affects production of its F-150 pickups and Transit vans. While supplies of the F-150 are down slightly from 87 to 85 days’ supply, according to Automotive News, Transit inventories have ballooned from 83 to 108 days. Days’ supply is a measure of how long it would take to sell all vehicles in stock at current sales rates.
Finally, FCA will close two Canadian plants in early January for a week, one in Windsor which builds the Chrysler Pacifica and Dodge Grand Caravan minivans and the other in Brampton, which produces Chrysler 300 and Dodge Charger and Challenger.
BMW prices the 5 Series
At the North American International Auto Show in Detroit next month, BMW is pulling out all stops to showcase its newly redesigned 5 Series, offering a bonanza of different configurations on its stand. Ahead of this debut, the German automaker has announced pricing for the new models, starting with the 2017 BMW 530i, which will open at $51,200, while the AWD xDrive model will be $1,300 more. The more powerful 540i starts at $56,450 and the 2017 BMW 540i xDrive at $58,750. All prices exclude $995 delivery and handling.
Pricing on the performance-oriented 2018 M550i xDrive as well as the 2018 BMW 530e and 530e xDrive iPerformance Hybrid models will be announced later. Deliveries of these new 4-door sedans are expected to begin this spring.
VW settles V6 diesel case
Volkswagen announced that it has reached an agreement to settle EPA and California Air Resources Board claims that its 3.0-liter V6 diesels were programmed to defeat emission tests. Like the settlement in the case against the company’s 2.0-liter 4-cylinder diesels which has a fix as part of the agreement, no final repair for the cars has been approved or offered to owners yet.
The consent decree requires VW to recall approximately 63,000 of the vehicles with second-generation 3.0-liter TDI engines to bring them into compliance with state and federal emission regulations, buy back or terminate the leases of 20,000 2009-12 first-generation models or fix them, contribute $225 million to an environmental remediation fund and pay $25 million to CARB to promote the sale of zero-emission vehicles in California.
Big trucks, big bucks
Even as manufacturers are struggling to trim inventories, one segment continues to be a strong and reliable profit center: pickup trucks. In addition to their rugged looks and ability to tow big things, heavy duty trucks have become a status symbol of sorts with many of them leaving dealer showrooms fully loaded and carrying sticker prices that would make a German luxury sedan owner’s head spin.
USA Today reports that 71 percent of the buyers of heavy duty trucks from Ford in November opted for the higher grades of its new Super Duty model. The paper said these trucks range from the F-250 Lariat, which starts at $45,105 up through the F-250 King Ranch, which retails for $54,260. And that’s before adding dealer-installed accessories.
Even light duty trucks are benefiting from the trend. GMC reports that about 75 percent of its light-duty crew cabs have upscale trims like its Denali package costing $40,000 or more, with a new range topper, the Denali Ultimate added last year. Ram is also seeing strong sales of its Laramie Longhorn and Limited models. “There’s really no compromises anymore,” said Jim Morrison, who heads the division, was quoted in the report. “It’s been a continued, substantial increase in the luxury market.”
Check out the This Week in Car Buying Podcast here.
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