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The U.S. automotive industry is poised for a modest upturn in the coming year, with new car sales projected to experience a slight increase. This positive trajectory reflects a gradual return to normalcy for the sector, rebounding from the disruptions caused by the global pandemic and supply chain challenges since 2020.
Forecasted Growth in New Car Sales:
Forecasts from prominent automotive data firms indicate a year-over-year growth ranging from 1% to 4%, with anticipated sales reaching approximately 15.6 million to 16.1 million vehicles. This surge would mark a significant rebound from the low point in 2022, where sales dipped to less than 14 million vehicles—the lowest in over a decade.
Market Dynamics:
The expected rise in new car sales is not only a promising development for consumers but also carries potential economic benefits. Increased vehicle production could alleviate concerns regarding affordability, especially in the face of inflation, high-interest rates, and record-setting new vehicle prices.
Insights from Industry Experts:
According to Jessica Caldwell, Head of Insights at Edmunds, the upcoming year holds the promise of enhanced inventory and appealing deals for consumers. However, the lingering impact of high-interest rates is anticipated to introduce conflicting dynamics to the market.
Shift in Pricing Power:
Edmunds suggests that the peak in pricing power for automakers has passed, driven by improved inventory levels leading to a resurgence of incentives in the market. While increased sales are positive for investors, the simultaneous decrease in prices and the rise in incentives pose potential challenges for automakers and dealers accustomed to record profits in recent years.
Considerations for 2024:
As automakers contemplate the evolving supply-demand equilibrium, questions arise about their willingness to push sales volumes closer to pre-pandemic norms. Jessica Caldwell underscores this by stating, “Automakers specifically will weigh one other key consideration in 2024.”
Global Comparison:
S&P Global Mobility forecasts a 2.8% year-over-year increase in global auto sales, setting the stage for what Colin Couchman, Executive Director of Global Light Vehicle Forecasting, calls a “cagey recovery” in 2024. This contrasts with the expected sequential growth in U.S. sales, marking the first since 2015-16.
Diverse Forecasts:
Projections for U.S. new vehicle sales in 2024 vary among industry experts. S&P envisions sales reaching 15.9 million units, GlobalData forecasts a nearly 4% increase to 16.1 million units, while Edmunds anticipates a more conservative 1% uptick to 15.7 million units.
Cox Automotive’s Perspective:
At the lower end, Cox Automotive expects 15.6 million vehicle sales, driven primarily by an increase in fleet or commercial sales. Chief Economist Jonathan Smoke highlights the expectation of constrained sales growth, emphasizing a return to a more normal trajectory compared to the tumultuous past three years.
Takeaway:
The anticipated rise in new car sales signals a positive shift for the U.S. automotive industry, reflecting a gradual recovery from recent challenges. As the market prepares for potential growth in 2024, industry players must navigate evolving dynamics, considering both opportunities and challenges.
