Ford ‘gaining traffic in the EV market,’ analyst says

Cox Automotive Executive Analyst Michelle Krebs joins Yahoo Finance Live to discuss the rise in average new vehicle prices, inventory issues, anticipated sales and bargains, interest rates, and the outlook for consumers.

Video transcript

RACHELLE AKUFFO: All right, well, let's continue our talk on the auto sector with a look at the other side of the car buying equation. Dealers and sellers continuing to see inventories improve with higher rates now emerging as the newest big bottleneck. Here with more, Michelle Krebs, Cox Automotive executive analyst. Good to see you, Michelle. So a lot of people wondering--

MICHELLE KREBS: Good to see you.

RACHELLE AKUFFO: --you know, we saw a lot of-- good to see you, too. A lot of these car dealers, a lot of these car companies had a lot of inventory issues. Now that we're seeing some of them, perhaps, better than others, manage their inventory better, where are we, perhaps, going to see some of these sales and bargains for consumers?

MICHELLE KREBS: I think that, well, we're seeing a very uneven level of inventory. We're seeing a lot of inventory for the domestic automakers especially in the pickup truck segments, the bigger trucks, and still very tight inventories for companies like Toyota and Honda. So we would expect that we will see some incentives on, for example, American made full-size pickup trucks. That's, I think, where we'll start. I think the other thing that will happen is we'll start to see a little more bargaining in the dealership, and maybe people won't be paying quite as much over the list price as they were in the past year. Some of those premiums will start paring down.

RACHELLE AKUFFO: And so as we look at some of these interest rates, obviously, has been tight for consumers. They have been trying to tighten their purse strings. How much is that going to weigh on consumers, as we see the Fed now perhaps slowing down on some of these rate increases and eventually, at some point, seeing that trickle down to some of these car prices and interest rates there?

MICHELLE KREBS: Well, and that's been a huge thing because vehicle prices are high. You mentioned it. The average vehicle price in December was $49,000. We're getting very close to that $50,000 mark. And then you add on rising interest rates, that's making the monthly car payment pushing $800 a month, or even some people are paying even over $1,000 a month. We also are seeing a chunk of people paying cash, so they don't have to pay those interest rates. So any movement down should help.

RACHELLE AKUFFO: And how does that change the balance, then, for new cars versus the used car sales?

MICHELLE KREBS: Well, used car sales have been very strong. It's a very robust market because a lot of people have been pushed out of the new vehicle market, either by the higher prices, or they used car loans usually have a higher interest rate, and/or people can't qualify for a new car loan. So we're seeing people being pushed more into the used car market. The problem is those prices are going to stay pretty high because we didn't see a lot of leasing. We didn't see a lot of trade-ins of kind of the-- we call them nearly new vehicles that are only a couple of years old. So that part of the used market will be pretty tight.

RACHELLE AKUFFO: I want to talk innovation now. I want to pivot to some of these automakers investing in self-driving technology. We had on US Transportation Secretary Pete Buttigieg earlier today. Take a listen.

PETE BUTTIGIEG: There's real promise in the technologies that you're seeing from the automakers. Eventually, I think they could potentially save many, many lives. But right now, we're in a period where the technology cuts both ways, and I'm very concerned about car owners relying too much on technology that is designed to assist a driver, not to replace a driver.

RACHELLE AKUFFO: And you do have that balance between reliance on this technology versus assisting. So as autonomous tech gets and becomes an increasingly important part of the car industry, tell us more about that and how you see that developing.

MICHELLE KREBS: Well, a couple of years ago, everybody was, oh, autonomous vehicles are going to be here any day now. And that's not exactly happened that way. COVID happened, and then there's just been a bit of a slowdown in that part of the market. But what we are seeing is a lot of those technologies going into vehicles to assist the driver being a better driver. Some will allow you take your hands off the wheel, but keep your eyes on the road.

But I think there needs to be a lot of education done of consumers about what those technologies can do and what they can't do. They don't fully drive the vehicle. And so the driver still has to pay attention and be ready to take the wheel.

RACHELLE AKUFFO: And of course, a lot of that coming to the light in conversations about Tesla. And when we look at other EV makers, we saw that rise in interest towards the end of last year. And we're also seeing, of course, the price cuts, not just with Tesla, but also with Ford with its Mach-E as well. Some concerns about a potential race to the bottom with EVs. How do you see the pricing going forward?

MICHELLE KREBS: Well, that was a surprise. We saw Tesla put discounts in at the end of December. Their shopping went way up. We saw that on our website. Then they cut prices, and they've cut them across the board, in China-- that's where they started-- then Europe and North America. And just this week, Ford announced it was cutting the price of the Ford Mustang Mach-E, which is an electric SUV that competes directly with the Tesla Model Y. General Motors has said it's not going to cut prices. Volkswagen has said it's not going to cut prices. We'll see where that goes.

But I think Ford really-- they're a direct competitor with that specific model with Tesla. So I think that's why they made that move. And Ford has really been gaining traction in the EV market. They made the second most sales by a wide margin behind Tesla last year.

RACHELLE AKUFFO: Certainly, that competition heating up a lot faster, as more models get introduced into the market. Michelle Krebs, Cox Automotive executive analyst, thank you so much for joining me this morning.