US car sales in 2022 are worst in over a decade

DETROIT — Automakers are hoping last year’s worst new car sales in more than a decade will hit the bottom of the market, at least in the short term.

Industry estimates show that 13.7 million to 13.9 million new vehicles were sold in the U.S. last year, down about 8% to 9% from 2021 and the lowest since 2011 when sales recovered from the Great Recession. It is standard.

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Sales varied widely among automakers as parts and supply chain issues affected the company at varying times, but for the most part, of General Motors The notable exception is a 2.5% increase — a decrease compared to 2021. ford motor, Hyundai and Kia all reported low-single-digit declines. Toyota decreased by 9.6%, StellantisNissan and Honda Motor recorded double-digit declines of 13%, 25% and 29.4% respectively.

But auto industry executives are cautiously optimistic that sales will pick up in 2023, regardless of recession fears, rising interest rates and other economic concerns. In a typical pre-pandemic year, we had over 17 million in sales.

Toyota and GM said they expect U.S. car sales to rise to about 15 million units this year. This is an increase of about 9% for him compared to 2022. S&P Global Mobility and Edmonds forecast 2023 US new car sales at 14.8 million, while Cox Automotive’s preliminary forecast is at 14.1 million.

“We’re cautiously optimistic about the future. In 2023, it’s not as high as we’d hoped, but we’re on the right track,” said executive vice president of Toyota Motor North America. Jack Hollis said. Wednesday briefing. “Demand is still outstripping supply.”

There are two reasons for optimism. Sales at or near recession levels due to parts and supply chain issues, and demand from consumers and businesses building after years of tight vehicle inventories during the pandemic. am.

Automakers have reported record or near-record performance in recent years amid tight new vehicle supply and robust consumer demand. They have relied on sustained latent demand as inventory levels normalize, hoping to avoid heavy price cuts and incentives to move vehicles.

Heavy discounts, typical of the industry, help sustain production and boost sales, but some auto executives have vowed not to return to such tactics at the expense of profits.

Automakers can offset overwhelming retail sales with fleet sales to companies such as governments and car rental agencies. These bulk sales have been an afterthought for retail customers in recent years and are traditionally less profitable than consumer sales, but they do help move products.

“The demand for fleets is definitely very high,” Hollis said, adding that he believes there is “moderation” across the industry when it comes to incentives.

Charlie Chesbrough, senior economist at Cox and senior director of industry insights, said car sales will record a notable increase in 2023 unless automakers give up pricing to make them more affordable. said he was not thinking about it.

Automakers have significantly passed on the rising commodity costs of producing cars for consumers, increasing the price of their vehicles. This, combined with skyrocketing interest rates, higher gas prices and broader inflation, has dampened demand for new cars.

“This is one of those rare times when the market has absolutely no idea what direction it might go. It could easily go up or down from where it is,” Chesbrough told CNBC. The pace of the last few months undoubtedly indicates a weakening of the market.”

Vehicle inventories improved towards the end of the year — indicating that record vehicle prices may finally ease. And increased volumes introduce the possibility of a “demand destruction” scenario, where supply begins to outstrip demand.

Many on Wall Street fear that with rising interest rates, falling used-car prices and a normalization of sales mix away from full-featured models, automakers’ most profitable days have passed. doing.

Chesbrough said that “there are certainly downside risks to the market” in the event of a full-blown recession. But he said the impact would not be as widespread as in the past. That’s because low-income and subprime renters, who typically stay away from the new car segment during a recession, are already doing so because inventories are low and records aren’t available. high price.

Last year’s total sales remain estimates, as not all automakers publish their results. Motor Intelligence reports last year’s sales of about 13.9 million units.