After enjoying a strong rebound in sales in 2023, the auto industry appears headed for slower growth this year as consumers grapple with high interest rates and high prices for new cars and light trucks.
Market researcher Edmunds expects the industry to sell 15.7 million vehicles this year. That amount would represent a slight increase from the 15.5 million sold last year, when sales jumped 12 percent.
“There’s definitely some pent-up demand, because people have been delaying purchases for a while,” said Jessica Caldwell, head of analytics at Edmunds. “But given the credit situation, we don’t think the industry will see strong growth this year.”
Since the coronavirus pandemic, automakers have struggled with shortages of essential parts that are preventing them from producing as many vehicles as consumers wanted to buy. In 2023, shortages, particularly of computer chips, have finally eased, allowing production to return to more normal levels.
But over the past year, the Federal Reserve has dramatically raised interest rates, significantly driving up costs for car buyers.
For years, many people took advantage of zero percent loans to buy vehicles, even as prices soared. But such deals, offered by automakers to move their inventories, have all but disappeared in the wake of the Fed’s rate hikes. In the fourth quarter of 2023, sales of new vehicles with zero percent financing made up just 2.3 percent of all sales, according to Edmunds.
Monthly payments are at near record levels. In the fourth quarter, the average monthly payment for new cars was $739, compared to $717 for the same period a year ago.
Several automakers hoped that a rapid increase in sales of new electric vehicles would lead the industry to gains by 2024 and 2025, but these cars and trucks have not taken off as quickly as many analysts and executives had expected. foreseen.
In 2023, sales of battery-powered models in the United States exceeded 1 million vehicles for the first time, and Cox Automotive, another research firm, expects sales to reach 1.5 million this year . But General Motors, Ford Motor, Volkswagen and other manufacturers expected an even faster acceleration.
But consumers have been overwhelmed by the high prices of many of the newest electric models. Many drivers are also reluctant to switch to battery power because they’re not sure they’ll be able to find enough places to refuel quickly. This forced automakers to rethink their plans.
GM once planned to produce 400,000 electric vehicles by mid-2024, but it has now abandoned that goal and delayed production of some electric models.
Ford aimed to have enough factory capacity by the end of 2024 to make 600,000 battery-powered vehicles per year, but it recently scaled back production plans for its electric F-150 Lightning and its electric sport utility vehicle, the Mustang Mach-E. .
On Wednesday, GM announced that its new vehicle sales in the United States jumped 14 percent last year. The company sold 2.6 million cars and light trucks in 2023, up from 2.3 million in 2022, when chip shortages limited production.
GM sold about 76,000 electric vehicles, up from 39,000 in 2022. But most were Chevrolet Bolts, a model the company recently stopped making. Only about 13,000 were vehicles based on newer battery technology that GM hoped would make its electric vehicles affordable to more car buyers.
GM’s fourth-quarter sales were relatively weak. They increased by only 0.3% compared to the same period of the previous year and decreased by 7% compared to the third quarter of 2023. The company said that sales of several important models were limited by a strike in some of its factories by the United Automobile Workers union. .
Separately, Toyota Motor, the second-largest car seller in the United States after GM, said its 2023 sales rose 7% to 2.2 million vehicles. The company’s fourth-quarter sales were 15.4 percent higher than the same quarter last year and about 5 percent higher than the third quarter.
Stellantis, the maker of Chrysler, Ram and Jeep vehicles, said it will sell 1.5 million cars and trucks in 2023, about 1% fewer than the previous year. The company plans to introduce eight new electric vehicles this year and aims for battery-powered models to account for half of its North American sales by the end of the decade.
Honda, Hyundai and Kia also reported strong U.S. sales for 2023 on Wednesday. And on Tuesday, Tesla, which dominates the U.S. electric car sector, said it had sold 1.8 million cars worldwide l last year, an increase of 38% compared to 2022.
Ford is expected to release its sales totals on Thursday.