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Market Correction in the Automotive Industry

By: Jamie Szczecina

The automotive industry has been one of the most significant contributors to the global economy for decades. The industry has seen its fair share of ups and downs over the years, known as market corrections. A market correction, or market adjustment, is a term used to describe a situation where the economy is changing and the price of products, such as new and used vehicle inventory and services, rise and decline after an extended period of growth. In the case of the automotive industry, a market correction can occur due to several factors, including consumer preferences and economic conditions, A.K.A. supply and demand.

In recent years, the automotive industry has experienced significant market corrections due to various factors. One of the primary drivers of this adjustment has been the shift in consumer preferences towards more fuel-efficient and environmentally friendly vehicles. This shift has led to a decline in demand for traditional internal combustion engine (ICE) vehicles, which has affected the demand for automakers that primarily produce these types of vehicles. Significant investments have been made in research, development, training, marketing, and production facilities because of this change. As a result, many companies have had to shift their focus to electric and hybrid vehicle supply to keep up with the consumer demand.

Another factor contributing to the market correction in the automotive industry is the changing economic conditions globally. The chip shortage and the COVID-19 pandemic have significantly impacted the industry with a decline in supply for manufactured inventory, along with consumer demand creating a market correction. The chip shortage consisted of lack of inventory resulting in marked up vehicles. Car dealers made more than ever because of these prices. Both the pandemic and chip shortage have also disrupted global supply chains, resulting in production delays and shortages of critical components, which have further impacted the industry's margins.

Industry trends have also played a significant role in the market correction. The rise of mobility services such as ride-sharing and car-sharing has led to a decline in car ownership and a shift towards subscription-based models. Additionally, technological advancements such as autonomous driving and connected cars are reshaping the industry, requiring significant investments in research and development.

To cope with the market correction, many automakers have had to adjust their business strategies. This includes the adjustment of management and inventory due to vehicle prices and interest rates. Some have focused on expanding their electric and hybrid vehicle offerings, typically due to manufacturers' pressure to sell, while others have invested in autonomous driving and connected car technologies for customers who are not in that market. Although electric cars have begun to thrive and are purchased more often than before, gas-reliant vehicles are still a highly considered option. While a higher priced market grows, there is still a market for the good ol’ gas guzzlin’ vehicles that we all know and (mostly) love. Sometimes there are just factors keeping individuals in those vehicles, upside down/negative equity being one of those factors. This is an obstacle for both consumers and dealers to overcome. Additionally, some automakers have consolidated their operations to reduce costs and improve profitability. Inventory options, management adjustment, and budget lots are all aspects looked at and re-evaluated during market correction.

In conclusion, the automotive industry is experiencing a significant market correction due to changing consumer preferences, economic conditions, and industry trends. While this correction presents challenges for the industry, it also offers opportunities for innovation and growth. By adapting to these changes and investing in inventory, the automotive industry can position itself for long-term success. Contentious communication to loyal consumers, offering superior service and growing market share with inventory and budget minded programs. Make inventory match customers needs and desires

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