US Markets
Thursday, December 21st, 2023 2:53 pm EDT
Key Points
- Anticipated Growth in U.S. Vehicle Sales: Forecasts from leading automotive data firms project a modest year-over-year increase of between 1% and 4% in new vehicle sales in the U.S. for the upcoming year. This growth is seen as a positive sign as the automotive industry aims to rebound from the disruptions caused by the coronavirus pandemic and supply chain challenges since 2020.
- Challenges and Dynamics Impacting the Industry: Despite the expected increase in sales, challenges such as high interest rates and the aftermath of the pandemic are highlighted. Jessica Caldwell, Edmunds’ head of insights, notes that while there is promise for increased inventory and enticing deals in the year ahead, high interest rates in 2023 may create conflicting market dynamics. The article emphasizes a shift in pricing power for automakers towards incentives, potentially impacting the profitability of manufacturers and dealers.
- Outlook for 2024 and Industry Decision-Making: The article outlines the industry’s considerations for 2024, posing a crucial question for automakers: whether they are content with the newly established supply-demand equilibrium or if they are willing and able to push sales volumes closer to pre-pandemic levels. The outlook for 2024 is described as a “cagey recovery,” with the industry moving beyond supply-side risks to navigate a more uncertain macro-led demand environment. Different forecasts from S&P Global Mobility, GlobalData, Edmunds, and Cox Automotive provide varying expectations for U.S. vehicle sales in 2024, indicating a range of perspectives within the industry about the extent of the anticipated recovery.
The U.S. automotive industry is anticipated to experience a modest increase in new vehicle sales in the coming year, according to forecasts from leading automotive data firms. This expected growth, ranging from 1% to 4% year-over-year, is attributed to the ongoing normalization of the automotive sector following disruptions caused by the global coronavirus pandemic and supply chain challenges since 2020. The projected sales figures range from 15.6 million to 16.1 million vehicles, representing a recovery from the recent low point in 2022 when sales dipped below 14 million vehicles, marking the lowest in over a decade.
The forecasted upturn in sales could have positive implications for both consumers and the economy. Increased vehicle production may address concerns related to affordability, a pressing issue amid inflation, high interest rates, and record-high new vehicle prices. Despite potential benefits, challenges lie ahead, particularly as interest rates are expected to remain high in 2023, creating conflicting market dynamics.
Edmunds, a prominent automotive insights provider, suggests that automakers’ pricing power has peaked, with improved inventory leading to increased incentives in the market. While heightened sales are generally favorable for investors, the shift towards lower prices and rising incentives could pose challenges for automakers and dealers that have previously enjoyed record profits.
Looking ahead to 2024, automotive stakeholders face a critical decision. They must weigh whether to maintain the newly established supply-demand equilibrium or push sales volumes closer to pre-pandemic levels. S&P Global Mobility forecasts a 2.8% year-over-year increase in global auto sales in 2023, while Colin Couchman, executive director of global light vehicle forecasting at S&P Global Mobility, envisions a cautious recovery in 2024, characterized by an evolving demand environment after overcoming clear supply-side risks.
If the anticipated increase in U.S. sales materializes, it would mark the first sequential sales growth for the automotive industry since 2015-16. S&P’s U.S. sales forecast is optimistic, expecting sales to reach 15.9 million units in 2024, a 2% increase from the projected 15.5 million units in 2023. GlobalData, which acquired LMC Automotive, predicts a nearly 4% increase in U.S. new vehicle sales to 16.1 million units. Edmunds provides a conservative estimate of 15.7 million new cars and trucks sold in 2024, a 1% uptick from the projected 15.5 million in 2023.
Cox Automotive, on the lower end of the spectrum, anticipates 15.6 million vehicle sales in 2024, driven primarily by increased fleet or commercial sales, while retail sales are expected to remain mostly flat. Jonathan Smoke, Chief Economist at Cox Automotive, acknowledges the likelihood of constrained and weak sales growth in 2024, emphasizing the importance of stability after the turbulence of the past three years. In summary, while the U.S. automotive industry anticipates a gradual recovery in sales, the sector faces complexities related to pricing dynamics, macroeconomic factors, and the ongoing aftermath of the pandemic.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/21/new-car-sales-expected-to-rise-next-year.html
