According to a report by S&P Global Mobility, the average age of cars and light trucks in the United States has reached a record 12.6 years. This marks a two-month increase from the previous year and continues the trend of Americans holding onto older vehicles.
The U.S. fleet grew to 286 million vehicles in operation (VIO) in January, a two million increase from 2023. However, the age distribution of these vehicles is shifting. In 2019, 98 million vehicles, or about 35% of the VIO, were under six years old. Today, the number has dropped below 90 million, and it's not expected to rebound until 2028.
This change means the car stays with the dealer if they can't sell them. For example, by the end of February, Lincoln had more than 33,000 vehicles on lots across the country, about three times more than the previous year. That's over four months' worth of cars in showrooms.
Similarly, Tesla (NASDAQ: TSLA) is also experiencing a situation with too many cars in stock. The company reported manufacturing 46,000 more vehicles than delivered in the first quarter 2024. This contributes to hundreds of Teslas sitting in an empty mall parking lot in St. Louis, as service centers can't keep up with the growing number of cars.
The same issue happens at an airfield in Berlin, Germany, where hundreds or even thousands of Teslas are parked after being produced at the company's Berlin Gigafactory, it's only European plant.
The growing number of unsold cars, especially for brands like Tesla, is worrying. After cutting prices in January, inventory levels remained steady. However, with more price cuts, customer interest has dropped, leading to many unsold vehicles piling up.
Prices are not the only factor driving changes in the automotive market; cars, in general, have become more reliable and safer than ever, even at high mileage. Because of this, people are keeping their cars longer, which is raising the average age of vehicles on the road.
Aftermarket
S&P Global Mobility predicts that in the next five years, cars six to fourteen years old or older will make up 70% of the cars on the road.
As cars age, the demand for repairs and maintenance is expected to increase, creating more work for these businesses. This trend offers significant business opportunities for aftermarket and vehicle service companies.
Unsurprisingly, the average age of electric vehicles is also expected to increase soon. Since 2019, these vehicles have had an average age of about 3.5 years because of the constant introduction of new models. However, as the rate of new electric vehicle launches slows, the average age will likely rise.
Scrappage Rates
Vehicle scrappage rates, which show the percentage of cars being taken off the road, have stayed steady. In January 2024, the scrappage rate was 4.6%, only slightly up from 4.5% in January 2023.
Since 2020, over 27 million passenger cars have been taken off the road in the U.S., while only about 13 million new vehicles were added. On the other hand, over 26 million light trucks, including SUVs, were scrapped, but nearly 45 million new light trucks were added.