Despite continued inflation, auto sales will during 2023 as semiconductor chip manufacturers catch up to the demand.
- After the pandemic brought about chip shortages, automakers now have access to enough chips to meet their demand.
- More vehicle production will lead to greater inventory levels, which could result in lower vehicle prices to move inventory.
- This year, the auto industry is expected to sell 15 million vehicles. While this is a 1 million vehicle increase from the previous year, it is still lower than years past when sales were closer to 17 million.
- Growth from the auto industry indicates that the manufacturers may survive any coming economic difficulties.
- Predictions from Cox Automotive indicate that December auto sales were likely 4% higher than at the same time last year.
- Overall sales are still lower than pre-pandemic numbers.
Why it’s news
A semiconductor shortage during the pandemic made it nearly impossible to buy a new vehicle, resulting in increased demand for used cars and skyrocketing prices.
Now that chip producers are catching up to demands, vehicle prices are changing. High interest rates and high monthly car payments are deterring shoppers from purchasing new vehicles. Of those who do make a purchase, a greater number of new vehicle buyers are defaulting on their loans.
At the same time, pre-owned vehicle prices are declining. While this may make a vehicle more affordable for a potential buyer, it also lowers the trade-in value of a buyer’s existing car.
Even with the shifting prices, auto industry experts expect buyers to be eager in 2023. Shortages of vehicles over the last two years have led to millions of buyers waiting for their chance to make a purchase. Those buyers are likely to be running to the showroom now that inventory levels are up.
Automakers will need to change some of their strategies. In the last two years, high demand and short supply have allowed buyer incentives to fall by the wayside. With fewer buyers now able to purchase a high-priced vehicle, sellers will need to adjust prices and incentives to encourage purchases, Bloomberg reports.
Experts such as investment banking advisory firm Evercore ISI are predicting that prices could fall as much as $2,000 per vehicle in the coming year.