When carmakers release their 2022 sales figures this week, they’re unlikely to bring good news.
Across the industry, American auto sales are projected to be 13.7 million for last year, the lowest number in more than 10 years, The Wall Street Journal (WSJ) reported Wednesday (Jan. 4), citing a forecast from J.D. Power and LMC Automotive.
The 2022 numbers represent an 8% decrease from the previous year’s sales. The J.D. Power/LMC projection says sales will remain below pre-pandemic levels of 17 million.
These releases follow a year in which new cars became scarce as automakers dealt with a shortage of computer chips and supply chain issues exacerbated by the Russia/Ukraine conflict. Meanwhile, continued high inflation left consumers turning away from big-ticket items such as car purchases.
As PYMNTS noted last month, the chip shortage isn’t expected to end anytime soon. A recent Financial Times report found that car makers and chip producers alike say the rising use of connected car functions and demand for electric cars will extend the chip drought into this year.
Hassane El-Khoury, CEO of chipmaker Onsemi, told the newspaper his company had already sold out of silicon carbide chips, which are chiefly used in electric vehicles, at least to the end of 2023 due to demand.
“There’s nothing you can do now to change 2023,” said El-Khoury. “We will be adding capacity every quarter, every month in 2023 to meet our customer demand.”
Meanwhile, car dealer sentiment is at its lowest level since the start of the pandemic, even as inventory levels pick back up, according to a survey last month from Cox Automotive.
“Dealers are normally optimistic, so the drop in the 3-month outlook to a new low in our survey history is particularly noteworthy,” Johnathan Smoke, chief economist at Cox, said last month.
“As the year began, dealers were telling us about one obvious problem: inventory. Now, as 2022 comes to a close, it’s all about the economy and interest rates.”
Consumers aren’t feeling much better, PYMNTS research has found, with Americans expecting 2022’s economic instability to last into 2024, meaning purchases of big-ticket items like new cars could be put on hold.
The used car industry isn’t faring much better. Last month saw Carmax, the nation’s largest used vehicle seller, report an 86% decline in profits and a 22% drop in sales. As PYMNTS wrote at the time, it was the “latest insight into consumers’ changed attitude toward buying and financing big-ticket items.”