New Car Market: Prices Are About To Plummet Due to Oversupply

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A recent report from UBS estimates that global car production will exceed sales by 6% this year, leaving an excess of 5 million vehicles that will require price cuts to get sold off of lots, Yahoo Finance reported.

“Given the bullish production schedules, we see high risk of overproduction and growing pricing pressure as a result," UBS said in a note to clients. “The price war has already started unfolding in the EV space, and we expect it to spread into the combustion engine segment [during the second half of 2023].”

EV makers might take a major hit due to the combination of soaring energy costs and high prices that put many consumers out of reach, Yahoo Finance noted. In January, Elon Musk’s Tesla slashed the price of its cars by up to £8,000 in the U.K. Some of its cheaper models are now around the same price range as mass market brands such as Kia.

Ford Motor Company and Lucid are among the other car manufacturers that have reacted to Tesla’s cuts by lowering their own EV prices, according to the Proactive Investors website.

Meanwhile, there is already evidence that car prices across all segments have softened. The latest data from Cox Automotive, released on Friday, April 7, showed that wholesale used-vehicle prices in March fell 2.4% from a year earlier, although they did tick up 1.5% from the previous month.

A March 23 report from Kelley Blue Book found that new vehicle prices dropped for three straight months, and that “it’s starting to look like a sustained trend.” Even so, prices remain “historically high.”

https://finance.yahoo.com/news/car-market-prices-plummet-due-153706713.html