Last year, the U.S. auto industry sold 13.7 million vehicles, 8 percent fewer than in 2021 and the fewest since 2011 during the Great Recession, data firm Wards Intelligence shows.
In contrast, sales had topped 17 million every year from 2014 through 2019 leading up to the COVID era.
Supply chain tangles, and particularly a critical shortage of computer chips, left dealers’ inventories scarce last year. Buyers went shopping for used vehicles instead, spiking prices for second-hand vehicles, as we reported in “Used Car Prices Skyrocket” (8 Jun 2022).
The year’s final sales figures betrayed the industry’s hopes for 2022.
Early in the year, companies believed that rock-bottom interest rates, signs of improved parts supplies, and still-strong consumer demand would lift the industry back to pre-COVID sales volumes.
“When we started , the industry all had projections above 16 million,” Jack Hollis, Toyota’s North American sales chief, told The Wall Street Journal.
Instead, inflation continued unchecked, keeping the price of new vehicles lofty—averaging $46,382 in December, near their record high, according to data service JD Power.
In response to rampaging inflation, the U.S. Federal Reserve began briskly raising interest rates, lifting car payments beyond the range that many buyers could afford.
Also, supply chains remained sticky and the supply of chips failed to increase as much as expected; vehicle assembly plants cut hours or suspended production altogether, sometimes for weeks, a trend we foresaw in “Auto Industry Chip Shortage Fallout” (24 Aug 2021).
In addition, the spike in prices for used cars waned, driving down the value of trade-ins, which made new cars less affordable for many shoppers.
In 2022, electric vehicles doubled their U.S. market share, rising to 6 percent from 3 percent in 2021. That mini-surge may have peaked because lithium to make batteries has skyrocketed in price and supplies are poised to fall short of demand.
Passenger vehicle sales perked up in last year’s final quarter as supply chains loosened and more parts became available, several industry executives told the WSJ.
The U.S. industry will sell 14.8 million passenger vehicles this year, a fractional increase from 2022 but still well below pre-COVID volumes, research firm Edmunds predicted.
TREND FORECAST: The auto sales slump will continue as the economy goes down and interest rates keep rising. In fact, even when interest rates are brought down prior to the 2024 race to the White House (which we forecast), considering the negative impact of the coming economic slowdown and inflation continuing to rise faster than wages, car sales will continue to soften.