Reply to The cars I looked at pre Covid are $8-10k more now

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]Wait til November or later, and prices will start to drop.[/quote]

Sorry to be the bearer of bad news, but this chip shortage is going to last a lot longer than everyone originally thought. Toyota just announced today that they are cutting production volume by 40% for September because the chips simply don't exist. A 40% cut in supply is insane. It is going to take at least 9 to 12 months for supply to improve noticeably; these issues won't be resolved overnight and it may actually be worse in November. Unlike normal years where November is when "we're clearing out all the 2018s to make room for the incoming 2019s", there will be no surplus of leftover 2021s by November 2021.

I also think we'll never again see the [i]deep [/i]discounting that used to occur in the new car market. [b]Automakers have figured out that consumers are willing to pay MSRP or very close to it.[/b] Deep discounts were used to "move" massive quantities of inventory that were sitting on packed lots. Used to be able to get $10k off higher-trim pickups. The new business model when the chip crisis resolves will be to keep a thinner inventory on lots, shift more buyers to custom order vehicles at ~MSRP or maybe ~3% off, and (for the automakers) stop overproducing. At that point, the only deep discounts will be on demo/service loaners or models that nobody wants.[/quote]

I mean, sure, but is that generalizable to a time in which supply is not artificially constrained? If Honda wants to reduce production to minimize the possibility of oversupply at the end of the year, Toyota will just make more cars.

I'll caveat this as just speculation since it isn't my specific area of subject matter expertise, but I would suspect that the old paradigm was more profitable for automakers. They were free to cut production to minimize the probability of end-of-year oversupply, but they didn't. I suspect that their revenue management strategies dictated that decision. In any event, isn't the risk of oversupply largely borne by dealerships anyway?[/quote]

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