Why Automakers and Car Dealers Are Surviving Economic Forecasts

Despite the bleak forecasts that are bombarded with us every day, today’s consumers face an extraordinary time without a historical strategy to guide them over the past few years. After shutdowns and disease outbreaks disrupted global supply chains, leading to the highest inflation in 40 years and consequent aggressive interest rate hikes by global central banks, strong job markets and consumers still spending continues.

After decades of sluggish wage growth, workers, especially those at the bottom of the wage ladder, have enjoyed the biggest wage gains of a generation. Add to this record-low unemployment and we are lost in unprecedented pre-recession waters. Consumers seem to be ignoring rising interest rates and not curbing their spending. Supply is not keeping up with demand in the housing and auto industries.

Consumers are calmly looking to the future. Job security has been bolstered by recent wage increases, allowing them to ignore the headlines. Perhaps their willingness to spend is based not only on today’s economic environment, but also on their individual income expectations and future prospects.

Combining the willing consumer base with pent-up demand created by supply chain disruptions, it’s reasonable to expect that forecast indicators will be disrupted. The formally predictable impact of an inverted yield curve triggering a recession and ultimately stagnating auto sales may now be called into question.

An interesting fact to consider when analyzing how stuck demand affects total sales is to recognize the correlation between total sales and total mileage. U.S. sales fell from over 17 million in 2019 to around 20 million. 13.6 million units in 2022, the number of miles covered in that period increased. In 2021, the number of miles driven will increase by more than 11% year-on-year, and by more than 5% in 2022, according to the Department of Transportation.

Looking ahead, I disagree with the negative sentiments of the mainstream theories about the automotive industry in 2023. Yes, we are experiencing an inverted yield curve. Yes, this reversal usually predicts a recession, and yes, a recession means lower car sales. Maybe not this time. Years from now, when economists are trying to explain the auto industry’s cycles and predict doom and gloom, 2023 will be an outlier. The reason, again, is the resilience and adaptability of US auto dealers.

https://www.autonews.com/guest-commentary/why-automakers-car-dealers-will-weather-economic-forecast Why Automakers and Car Dealers Are Surviving Economic Forecasts

Exit mobile version