A customer views a vehicle at a BMW dealership in Mountain View, CA on December 14, 2022.
David Paul Morris | Bloomberg | Bloomberg | Getty Images
Detroit — Wall Street and industry analysts continue to “request destruction” The scenario for the US auto industry this year as interest rates rise and consumers grapple with auto affordability issues and recession fears.
Since the start of the COVID-19 pandemic in early 2020, supply chain and parts disruptions that have impacted vehicle production have forced automakers to push unprecedented prices amid resilient demand and low inventory levels. We are experiencing decisiveness and profit per unit.
These factors have created supply problems for the automotive industry. demand problem — just like automakers are slowly improving their production.
“We’re trading supply issues for demand issues,” Cox Automotive chief economist Jonathan Smoke said Thursday.
cox We have 10 predictions for the US auto industry This year shows such results. Here they are, along with why investors should pay attention to them.
The electric vehicle tax credit under the Control Inflation Act has not been finalized, but the incentives for commercial vehicle and fleet owners promise to be highly profitable.
Unlike consumer vehicles, which qualify for credits of up to $7,500, fleets and commercial vehicles do not have to meet stringent US requirements for domestic components and batteries.
“This is where we’re really going to see most of the new car sales growth in 2023,” Smoke said.
Cox said that U.S. new car sales 14.1 million in 2023up slightly from about 13.9 million last year.
Due to the coronavirus pandemic, franchised auto dealers Many physical dealers have closed Because of the global health crisis.
This trend is expected to continue in the coming years as many automakers commit to aligning production with consumer demand.
Consumers are using their cars longer due to the lack of new cars available and rising costs. This is expected to increase backend service business and dealer revenue relative to sales. Dealers make a big profit from servicing vehicles. This increase is expected to help offset potential declines in sales and financing options.
“I think that’s one of the silver linings for dealers,” Smoke said. [and] It is somewhat countercyclical during recessions. ”
High interest rates encourage vehicle purchases much more challenging Not economical for mainstream buyers, not economical for wealthier consumers. Such a situation is expected to drive people who have the cash to buy a vehicle to buy it unfinanced.
Smoke said the average new car loan interest rate is over 8%. For used cars, it’s closer to 13%.
When interest rates were low, vehicle affordability was already a concern. This problem, Federal Reserve to Raise Interest Rates to fight inflation. Cox reports vehicle affordability is at record lows.
Cox said the increase pushed the average monthly payment for a new car to $785 and lease payments to $661. The average list price for a new car is still over $27,000 for him, and the average transaction price for a new car last year was around $49,500.
“The long-term concern is that this will lead to products being produced that are further skewed towards the luxury end and further away from the affordable price range,” Smoke said. It means that you have a price problem.
Used car prices soared during the first two years of the coronavirus pandemic as new cars and trucks became scarce. Wholesale prices will peak in January 2022. Decreased by 14.9% last year It is expected to decline another 4.3% by the end of the year.
This decline is still insufficient to offset the 88% rise in index prices from April 2020 to January 2022.
Used car inventories have stabilized at almost 50 days, close to 2019 levels before the coronavirus pandemic drained supply.
Cox reports a 66% increase in all-electric vehicle sales in the U.S. last year to over 808,000, reaching 1 million amid a slew of new models slated to hit the market is not such a big leap. EVs make up about 5.8% of new cars sold in the US
Add hybrid and plug-in hybrid electric vehicles paired with conventional engines, Smoke said. The new cars sold this year are “electric” cars. It will increase from 15% to 16% by 2022.
3. By 2023, new car sales will increase and used car sales will decline, resulting in a decrease in overall retail sales volume.
Automakers are expected to rely more heavily on sales to commercial and fleet customers such as rental cars and government agencies than in recent years to increase total sales.
Automakers have prioritized more profitable sales to consumers amid recent inventory shortages. However, as consumer demand is expected to decline, businesses are expected to turn to fleet sales to fill that demand gap.
Declining demand is expected as the auto industry gradually ramps up vehicle production and inventory levels rise.
Inventory levels over the last two years have been at record lows due to supply chain and parts issues impacting production.
All the previous forecasts, combined with the economic concerns, will put a lot of pressure on the US auto industry over the next year.
This also happens when: Automakers are investing billions of dollars New technologies such as electric vehicles and advanced driver assistance systems and self-driving cars.
“We’re hoping for a soft landing for the economy, but we believe the car market will be subdued over the next year,” Smoke said.
https://www.cnbc.com/2023/01/15/ten-auto-industry-predictions-2023.html 10 predictions for the automotive industry in 2023