US Car Buyers Are Traveling Longer Distances To Find Their Vehicle As Dealer Inventories Dry Up: J.D. Power

Lean inventories at dealerships — and strong demand for pickup trucks — are forcing U.S. car buyers to drive out farther to find the car of their choice, says automotive consultancy J.D. Power.

What Happened: The average number of buyers who traveled more than 50 miles to find a car grew 33% in the three months ended Sept. 30, compared with the same period two years ago and months before the COVID-19 pandemic, the consultancy said.

Also, the average consumer traveled 47 miles to buy a new vehicle in the third quarter, which is up 10 miles from the third quarter of 2019, the report said.

See Also: US Automakers — Ford, GM — Stare At Lowest Inventory In 12 Years But Here's Why They Could Still See Major Jump In Q2 Sales

J.D. Power has based the latest comparisons to 2019, a stable year for the automotive sector. 

“Loyalty is being stressed as a result,” said Tyson Jominy, vice president of data and analytics at J.D. Power.

“Things have deteriorated fast as inventory has remained below 1 million retail units on the ground.” 

The research agency says loyalty score was at 49.3% in June, a full 2.5 percentage points higher than June 2019. In October, brand loyalty was running at 48.5%, only 0.7 percentage points better than October 2019.

The industry did see a spike in loyalty during the pandemic and as the industry rebounded in late 2020. 

See Also: GM Shares Slide Post Q3 Results; Eyes 'High-End' Of Raised FY21 Adjusted EPS Outlook

Falling Sales, Leaner Inventories: The lingering global chip shortage that started last year has hit sales hard as inventories in dealer lots dry up. Most automakers have reported huge declines in volume and are prioritizing building their most profitable trucks and SUVs first. 

General Motors Company GM sold 446,997 vehicles from July to September, down 32.8% from a year ago. Ford Motor Company F sold 400,843 vehicles in the third quarter, down 27.4% from a year ago.

What's Next: The research agency does not expect the inventory situation to improve until late next year but sees the production rate picking up soon. 

“As production begins to recover in early 2022 we will see units continually to turn quickly as the U.S. industry is now down 4.5 million sales since the pandemic began,” said Jominy.

The chip shortage has caused GM, Ford and others to shut down plants for weeks. Ford has even dispatched vehicles to dealer lots that are partially built and later finished them when chips were available again. 

See Also: Ford Q3 Earnings Highlights: Revenue Beat, Dividend Returns, Strong Lightning Demand, Rivian IPO And More

Many of those sales are delayed and are expected to rebound as production increases. In October, 54% of vehicles will be sold within 10 days of arriving at a dealership and all inventory is turning in 20 days.

Price Action: At market close Friday, GM shares were up 0.35% at $54.43 and Ford shares were up 1.33% at $17.08.

Photo: Courtesy Ford

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