The days of the $20,000 new vehicle may be over, but is the auto industry slowly rebounding?

The days of buying a new vehicle for under $20,000 are nearly over, for now, in the U.S. The average price of a new vehicle is now over $48,000, an incredible 25 percent jump since the onset of the COVID-19 pandemic in March 2020. According to the latest figures, only one vehicle, the Mitsubishi Mirage, can be bought for less than $20,000. But despite that low price, sales of the Mirage have been sluggish in the U.S., dropping by 44 percent this year. There is also a possibility that Mitsubishi will stop selling the Mirage by the mid-2020s. 

The most inexpensive vehicle offered by an American brand currently is the 2024 Chevy Trax SUV, priced at $21,500. Other vehicles that hover around the $20,000 figure are the Kia Rio and Nissan Versa. Automakers are continuing a trend of discontinuing or lowering production of their cheapest vehicles, which likely means these vehicles won’t stay under or at $20,000 much longer. 

In a nutshell, what happened to the auto industry was a pandemic-related computer chip shortage slashed global auto production. Vehicles were suddenly in short supply at a time of high demand, and prices rose dramatically. 

Automakers prioritized their most profitable cars, and during the height of the supply chain issues and chip shortages, Nissan actually boosted production of expensive vehicles like the Altima and Pathfinder. One of Nissan’s cheapest vehicles, the Versa, saw production cut by 78 percent. The Sentra and Kicks models also had production lowered. In addition, the used car market is tight, and as consumers migrated there, supply became short, and prices rose significantly. 

This year has brought some positive news for automobile shoppers for a change. The average price of a new vehicle has fallen by $865 from January to June 2023, moving that average price down to $48,808. The industry had been in a period of ‘inflation gone wild,’ as an executive analyst put it. New vehicle inventory has increased, from 1.75 million in January to 1.95 million in June. Average transaction prices for the six-month period to start 2023 have gone down for several major brands, including Tesla (down over $7,000) and Land Rover (down just under $7,000). Sale prices of Lincoln, Volvo, Mercedes-Benz, Fiat, Volkswagen, Buick, Polestar, and Nissan have also gone down. 

There are also positive signs in the electric vehicle industry, as supply is up and prices are going down. The average transaction price for EVs was $53,400 in June, down from more than $61,000 in January. Automakers are increasing their incentive spending and dealerships are agreeing to sell cars with larger discounts off sticker prices. New vehicle prices are only up by 1.6 percent over the last 12 months, compared to the same time last year when the year-to-year increase was 12.4 percent.