Auto prices likely to remain ‘higher for longer’ – Morgan Stanley (NYSE:GM) – bestinau

Prices for both new and used autos soared to a new all-time high in the month of June. The bad news for prospective buyers is that this rising-price trend shows no signs of abating.

According to Kelley Blue Book, the average new car in America sold for just over $48K, an all-time high. While used car prices fell slightly from their peak in May, the average price remains just above $28K.

The main cause of the elevated sticker prices for autos, particularly new autos, is the persistent supply chain problems that have held back deliveries for numerous automakers including General Motors (NYSE:GM), Ford (NYSE:F), Stallantis (NYSE:STLA), Toyota (™), and more. For example, GM indicated in early July that nearly 100K vehicles were left waiting for components before they could be shipped to dealers.

“GM’s second quarter vehicle wholesale volumes were impacted by the ongoing semiconductor supply shortage and other supply chain disruptions mostly in June,” the automaker explained at the time. “As a result, GM will hold about 95K vehicles manufactured without certain components in company inventory until they are completed and will recognize revenue when they are sold to dealers, which is expected to happen throughout the second half of 2022.”

According to Morgan Stanley analyst Adam Jonas, July showed little signs of improvement, meaning these projected deliveries are likely due later in the second half of 2022 rather than the immediate term.

“Autos are in their own world of pricing power due to one reason: dealers don’t have cars,” he told clients. “This didn’t get better in July.”

Per Jonas’ research, GM’s days supply is 39 days, Ford’s is 40, and Stellantis’ is 45, all of which are well above 2021 levels. The industry average for the month of July was estimated to be 24 days, per Morgan Stanley’s research. Jonas noted that the extended delivery timelines add to inflation issues that also hit many of their would-be consumers that are now less able to bear the steady price increases.

Elsewhere, Jonas updated his research on market share data in battery electric vehicles.

“We note that Tesla (TSLA) lost EV share, declining to 61% vs. 68% last year,” he wrote. “Of legacy OEs, Ford delivered the most BEVs in July at a combined 7,669 between the Mach-E, F-150 Lighting, and E-Transit.”

While Tesla (TSLA) still enjoys a dominant position in BEV sales, non-Tesla sales jumped over 90% from the year prior, according to the research. Nonetheless, Tesla’s overall domestic market share increased about 1.3% from 2021.

Read more on Tesla’s latest “Cyber Rodeo”.