WASHINGTON, D.C. – Skyrocketing prices of new cars within the last few years – driven in part by supply chain issues as a result of the COVID-19 pandemic – have resulted in many consumers being priced out of the market and instead sinking their money into keeping their current vehicles on the road as long as possible. Due to this new hesitancy on the part of auto buyers, there is now a growing surplus of new vehicles on dealer’s lots that experts are predicting will soon result in prices plummeting in the near future.
A new UBS report estimates that the production of new cars globally will outpace sales by as much as 6 percent in 2023; if this comes to pass, it will result in approximately 5 million vehicles that will require year end price cuts to make room for next year’s models. These price cuts will most likely take place near the end of the year, but electric vehicles – the demand for which has begun to dip more sharply as of late – are already cutting prices.
Essentially, experts are expecting a price war to take place in the latter half of 2023, and consumers are expected to come out on the winning end.
Given the bullish production schedules, we see high risk of overproduction and growing pricing pressure as a result,” the UBS report said. “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].”
Automakers who specialize in family cars such as SUVs are expected to suffer the most from the impending price cuts, whereas luxury cars are expected to hold up better in terms of retaining their value.
However, EV makers are anticipating taking a major hit from price cuts later this year due to numerous factors, including an increase in energy costs, lower overall demand due to current technological shortcomings – such as lengthy charging times – and the fact that electric-powered cars tend to have high sticker prices that many consumers are simply unable to afford.
In addition, prices of used cars have also experienced a slight drop as of late; Cox Automotive recently reported that wholesale used vehicle prices in March were down 2.4 percent year-over-year.
Christopher Boyle is an investigative journalist, videographer, reporter and writer for SEARCHEN NETWORKS® as well as other independent news and media organizations in the United States. Christopher works on a wide variety of topics and fields, has been featured in print and online in a variety of publications, from local to national, and helps keep a keen-eye on what’s happening in the automotive world for Auto Buyers Market.