2025: The year car prices return to Earth



These vehicles are priced to move — straight into a brick wall.

Car prices have risen an average of $10,000 since 2020. Manufacturers love the profit margins — for now. But with models flooding the market at prices consumers simply can't afford, we've got prime conditions for a crash.

All brands are loading up their top-trim levels — only to find sticker shock scaring off the customers. As a result, dealers are getting desperate — and creative.

Insurance premiums have doubled, and repossession rates are the highest ever at 23% — which means banks are less likely to give out loans and leases. Not good, considering that inventory levels — across all vehicle manufacturers and dealerships — are the highest they’ve been in the last eight years.

Those buyers who do make the cut better be prepared: Monthly payments are sitting at an average of $760 and above.

Frozen Tundras

This all spells trouble.

The types of cars not selling may surprise you: New Toyota Tundras, which used to fly off the lot in weeks, now languish in park for as many as 250 days. What changed? Try the new $60,000-$70,000 price tag.

Then, there are the new Ford Explorers. You'd think the savings of shifting production to Mexico would get passed on to the consumer. Think again — at around $80,000 a piece, these cars are wildly overpriced. A few extra features and safety measures are easy to skip when you can get a Ford Maverick for $30,000.

Sticker shock

All brands are loading up their top-trim levels — only to find sticker shock scaring off the customers. As a result, dealers are getting desperate — and creative. According to Kelley Blue Book, incentives designed to attract buyers now average 7.7%, or $3,744, “the highest amount in over three years and about $200 more than September.”

KBB also reports a sharp increase in the number of automakers offering 0% financing and other deals to qualified buyers for less in-demand vehicles like the non-hybrid models of the 2024 Kia Sportage.

A lack of used vehicles means that trade-in value has also increased. I predicted this three years ago, based on the chip shortage and the subsequent lowered production. Used car pricing is strong, with less inventory available.

So while the market is still too expensive for many buyers, we may soon see far more favorable conditions.

Basic is beautiful

The Fed's three consecutive rate cuts since September should trickle down to car buyers later this year.

According to Cox Automotive chief economist Jonathan Smoke (as quoted by KBB): “I expect the best time for lower rates will be by the spring. ... [Buyers] could see 1-1.5 points of further improvement, more on used vehicles.”

This could mean 3%-5% drop in new car prices by the end of the year, bolstered by greater incentive programs.

Expect to see more entry-level trims and lower-priced cars returning to the market — meeting the huge demand for vehicles under $25,000. I also expect EV sales will slow way down without mandates and tax credits, the only exception being Tesla.

Whatever happens — as always — we'll keep you posted.


Korean carmakers eye future; can USA compete?



Busan is the cleanest city I've ever seen: not a cigarette butt or gum wrapper on the ground. No garbage pails either. I'm told that if people see litter on the ground, they pick it up and put it in their pocket until they can throw it away.

Last month, I was in Korea's second-largest city for the 2024 Busan International Motor Show, which has been held biennially since 2001. Starting this year, it has a new name: the Busan International Mobility Show, which better reflects the wider range of transportation innovation it hopes to showcase.

[Hyundai] has built every vehicle it makes to be either hybrid, gas, or electric. The company was smart enough to say, 'Let's make this like Lego: same body, different drive line underneath.'

I didn't see any flying cars, but my visit did give me the chance to reflect on the rise of the Korean automobile industry in the last two decades.

Korean cars have been in the United States market since 1986, with the Hyundai Excel. That car was a huge hit with American consumers, but quality issues over the long run gave it and other Hyundai models a bad reputation.

In 1998, Hyundai decided to change its poor reputation abroad by making massive investments in design, quality, and marketing.

It looked at how the Japanese were offering packaged trim levels and did the same.

It also looked at the typical U.S. three-year, 32,000-mile warranty and decided to more than triple that: 10 years, 100,000 miles, including basic maintenance. To this day, no other manufacturers have tried to compete on warranty. The Germans have extended their warranties to four years, 50,000 miles, which hasn't kept Hyundai from taking a big chunk of their market.

Hyundai also began manufacturing in America. It 2005, it opened a factory in Montgomery, Alabama; followed by a Kia factory (Hyundai has been Kia's parent company since 1997) in West Point, Georgia, in 2010. The latter expects to roll its five millionth car off the assembly line sometime in 2025.

Last year Hyundai's luxury brand Genesis began producing the Electrified GV70 SUV in the Montgomery plant, the first Genesis model to be manufactured in America.

I spoke to Hyundai head Jay Chang about their EV strategy. While vehicles the Kia EV9 have gotten a lot of acclaim, I asked him point blank what happens if the market for EVs collapses? His answer was simple: we'll make electric vehicles if people want them.

Unlike us, Hyundai doesn't have an EV mandate; moreover, it's realized electric cars aren't the answer. So instead of going all in, it's built every vehicle it makes to be either hybrid, gas, or electric. The company was smart enough to say, "Let's make this like Lego: same body, different drive line underneath."

And now that the Genesis line is competing with luxury vehicles Lexus and Mercedes, it's beginning to go after the performance market — vehicles like BMW's M series and Audi RS — with its Magma line. I spoke a little with Hyundai Motor Group president and chief creative officer Luc Donckerwolke about this, and the company has assembled some top-notch talent, including veteran Porsche engineer Manfred Harrer as well as BMW veteran (and recent Hyundai head of R&D) Albert Biermann.

While in Korea I was also able to visit Ulsan and tour the largest car factory in the world. No cameras allowed, unfortunately, but I did watch as vehicles were loaded onto a ship with unbelievable grace and precision: It was like one big musical number. They loaded 12 floors of cars (over 10,000 vehicles in all) in six hours.

It's important to note here that not only is Hyundai half-owned by the Korean government, but it's very well vertically integrated. Hyundai owns a steel company as well as a chip company — the latter, MegaChip, gave Hyundai a huge advantage during the supply-chain crisis.

See below for some of my video from the 2024 Busan International Mobility Show:

- YouTube www.youtube.com

Major automakers plan to 'leverage public and private funds' to install electric vehicle charging network around North America



Seven car manufacturing giants are planning a joint effort to bolster electric vehicle charging infrastructure by installing a network of charging locations around North America.

BMW Group, General Motors, Honda, Hyundai, Kia, Mercedes-Benz Group, and Stellantis NV are the companies involved in the plan. A press release notes that the effort will "leverage public and private funds."

"The joint venture will include the development of a new, high-powered charging network with at least 30,000 chargers to make zero-emission driving even more attractive for millions of customers," the press release states. "With the generational investments in public charging being implemented on the Federal and State level, the joint venture will leverage public and private funds to accelerate the installation of high-powered charging for customers."

The plan is for the charging network to run off of renewable energy. It is anticipated that the first charging locations will open next summer.

"The first stations are expected to open in the United States in the summer of 2024 and in Canada at a later stage," the press release notes. "In line with the sustainability strategies of all seven automakers, the joint venture intends to power the charging network solely by renewable energy."

While traditional cars can quickly fill up at gas stations, electric vehicle charging is a much slower process. For instance, while filling up a typical sedan's gas tank may take just a couple of minutes, Tesla, a popular electric vehicle manufacturer, says that Superchargers can provide up to 200 miles of range in 15 minutes.

"The fight against climate change is the greatest challenge of our time. What we need now is speed – across political, social and corporate boundaries," Mercedes-Benz Group CEO Ola Källenius, said, according to the press release. "To accelerate the shift to electric vehicles, we're in favor of anything that makes life easier for our customers. Charging is an inseparable part of the EV-experience, and this network will be another step to make it as convenient as possible."

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