By 2022, there were half as many new vehicles with a sticker price under $30,000 as there were in 2019.

Many car companies are prioritizing high-profit vehicles over starter cars.
The percentage of vehicles listed under $30,000 dropped in half from 2019 to 2022.
That’s bad news for the whole car-buying market.

Automakers are abandoning entry-level vehicles, often called “starter cars” — and it’s a problem not just for buyers looking for a less-expensive one, but all car shoppers. 

New vehicles had an average sticker price (MSRP) of $48,205 in January, according to Edmunds, with transaction prices not far behind, at $47,911. 

Though those figures are averages, it’s clear that lower-end vehicles are more costly than they used to be — a direction automakers have been moving in for years.

In 2019, about one-third of new vehicles had a sticker price under $30,000, according to J.D. Power. By 2022, that number was cut in half, with only about 17% priced there. While overall vehicle manufacturing fell by 2.7 million from 2019 to 2022, sub-$30,000 vehicles fell by 3.1 million. 

It’s “profit-maximizing behavior due to the supply chain crisis,” Tyson Jominy, J.D. Power VP of data and analytics, told Insider. “It’s not indicative of demand, which is very strong below $30,000.” 

Why is there a pricing crisis?

There are a few reasons automakers have gone this route. Part of it is related to the pandemic-induced inventory challenges brought on by the chip shortage. 

“They shifted their focus of chips onto the things that the customers wanted the most,” Whitney Yates-Woods, dealer principal of Yates Buick GMC in Goodyear, Arizona, said of automakers like GM — which includes larger vehicles and trucks. “But that meant that some of the cheaper stuff went by the wayside.”

Some of this has been going on since before COVID, especially as many automakers discontinued sedans several years earlier. 

Profit, as Jominy pointed out, is also a key factor — and automakers are even willing to sacrifice market share for it. 

“The more economical vehicle market they’re exiting as they find that profits are much greater on these higher dollar heavier units,” Scott Kunes, COO of Kunes Auto and RV Group, which owns more than 40 dealerships in the Midwest, said. 

“There is definitely a void happening in the market for those vehicles,” Kunes added. 

What car buyers can look out for

The used market isn’t much better, Kunes noted — the average used vehicle …read more

Source:: Business Insider

      

Automakers abandoned the ‘starter car’ — and it’s raising prices for everyone

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