Plenty of ’22 models still on the shelf

For all the talk of low inventories, and car dealers tacking
“market adjustments” on top of MSRP, there were nearly a
half-million units of leftover 2022 model year vehicles still
advertised for sale in the United States heading into the first
weekend of December. That is on top of the 2023 vehicles that have
been arriving on dealer lots.

According to S&P Global Mobility’s analysis of US dealer
advertised inventory data, mainstream brands Ford, Chevrolet, Ram,
and Jeep had about 300,000 units of 2022 models advertised as
available for sale the week ending December 4. Those four brands
account for 71% of 2022 advertised inventory listed by mainstream
brand dealers – and 66% of all dealer-advertised inventory when
including luxury marques.

Among luxury brands, Mercedes-Benz and Lincoln still showed the
most remaining 2022 vehicles in dealer advertised inventory,
according to the S&P Global Mobility analysis.

While most automakers traditionally ease off production in late
summer to transition to the new model year, and clear out the last
of their old models by Christmas, certain automakers actually have
seen their 2022 inventories increase in October and November.

“Model year discipline has ebbed,” said Cheryl Woodworth,
consulting associate director for S&P Global Mobility. “With
the chip shortage, inventory control is not as meticulous as it
used to be.”

Is running old inventories into the new model year a bad thing?
It can be for automakers, but it could spell retail relief for
consumers. With ’22 models carrying the stigma of being “older” –
even if the 2023 model is unchanged – that can mean dealers are
incentivized to blow out the zero-miles ’22s.

“The longer you wait to change over your model year, the more it
hits your residual values in terms of tougher grading,” Woodworth
said.

Some dealers are offering below-MSRP discounts on vehicles that
carried sticker-price-plus Monroney labels just months before. And
with consumer demand waning due to external economic forces such as
inflation and recession-related layoffs, the pressure to move the
metal increases.

Usually, the inventory arc for each model year follows a
predictable curve, peaking in spring as production hits its stride,
and then descending in summer during the annual selldown and the
model year transitions in September and October. But supply chain
chaos has made it impossible for some automakers to follow
tradition.

That said, with certain elements of the supply chain still in
flux, it might make sense for manufacturing continuity to continue
building 2022 models if a 2023 minor model change includes a part
that is not readily available, Woodworth said.

In November, Ford was still delivering 2022 Escapes to
dealerships from its Louisville factory, as the 2023 minor model
change is still ramping up. The same continuation of late
production ’22 models applies to the Ford Bronco Sport and Lincoln
Corsair, which share many of their underpinnings with the Escape
platform.

Remaining 2022 units are often specific to certain models. In
the market for a luxury SUV? The models with the highest remaining
2022 model year units are the Mercedes-Benz GLC and Lincoln
Corsair.

Why the excess ’22 Mercedes GLCs? It’s still awaiting a 2023
freshening – the national mbusa.com website still wasn’t listing
the 2023 as available on December 15 – and as such 2022 models are
still in strong supply. Among luxury brands, Mercedes had 33% share
of remaining ’22 models still advertised the week ending December
4, while Lincoln accounted for 22% share of leftover luxury
’22s.

That said, Mercedes dealers have done a strong job of selling
down its 2022 inventories from mid-summer in anticipation of the
’23 model arriving. And other key Mercedes volume models – GLE,
S-Class, and C-Class – are mostly represented by 2023 model
production.

Supply chain hiccups also are affecting inventories in other
ways. Tens of thousands of so-called “ghost units” of the F-150 and
Chevrolet Silverado have rolled off the assembly line but were
missing crucial parts, and have been collecting in parking lots
near their respective factories until they can be released. On top
of those unfinished units, Ford dealers had nearly as many F-150s
advertised the week ending December 4 as they did in August in
September. When the ghost units finally receive their needed parts
and enter wholesale inventory – Ford hopes it will happen by the
end of December – that will add to the pressure to clear out the
’22 models at the dealer level.

The combined black-swan events of COVID, semiconductor
shortages, and the Russian invasion of Ukraine disrupted
traditional manufacturing and supply norms – the latest downstream
impact being the overrun of prior model-year production and
inventory. How the industry can recover to its regular cadence
depends on its adaptability to these continued disruptions.

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.