After enjoying a strong sales rebound 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.
Edmunds, a market researcher, expects the industry to sell 15.7 million vehicles this year. That would be a modest increase from the 15.5 million sold last year, when sales rose 12 percent.
“There’s definitely pent-up demand, because people have been putting off shopping for a while,” said Jessica Caldwell, chief insights officer at Edmunds. “But given the credit situation, we don’t think the industry will see much growth this year.”
Since the coronavirus pandemic, automakers have struggled with shortages of critical parts that have prevented them from producing as many vehicles as consumers wanted to buy. In 2023, shortages, especially of computer chips, finally eased, allowing production to return to more normal levels.
But over the past year, the Federal Reserve has significantly raised interest rates, significantly raising costs for car buyers.
For years, many people took advantage of zero percent loans to purchase vehicles, even as prices rose. But those deals, offered by automakers to move inventory, have all but disappeared following the Federal Reserve’s rate hikes. According to Edmunds, in the fourth quarter of 2023, sales of new vehicles with zero percent financing represented just 2.3 percent of all sales.
Monthly payments are at near record levels. In the fourth quarter, the average monthly payment for new cars was $739, up from $717 in the same period a year ago.
Several automakers had hoped that a rapid rise in sales of new electric vehicles would propel the industry to profits in 2024 and 2025, but those cars and trucks have not taken off as quickly as many analysts and executives expected.
In 2023, sales of battery-powered models in the United States surpassed 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 rise.
But consumers have balked at the high prices of many of the newer electric models. Many drivers are also reluctant to switch to battery power, because they are not sure they can find enough places to refuel quickly. That has forced automakers to readjust their plans.
GM had once forecast it would sell 400,000 electric vehicles by mid-2024, but has now given up on that goal and delayed production of some electric models.
Ford had aimed to have enough factory capacity by the end of 2024 to make 600,000 battery-powered vehicles a year, but recently scaled back production plans for its electric F-150 Lightning and its electric sport utility vehicle, the Mustang Mach-E. . .
On Wednesday, GM said its U.S. new vehicle sales rose 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 the majority 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 many more car buyers.
GM’s sales in the fourth quarter were relatively weak. They were up just 0.3 percent from the same period a year earlier and down 7 percent compared to the third quarter of 2023. The company said sales of several major models were limited by a strike at some of its plants by the United Automobile Workers union. .
Separately, Toyota Motor, the second-largest auto seller in the United States after GM, said its 2023 sales rose 7 percent to 2.2 million vehicles. The company’s sales in the fourth quarter were 15.4 percent higher than the same quarter last year and about 5 percent higher than the third quarter.
Honda, Hyundai and Kia on Wednesday also reported strong U.S. sales for 2023. And on Tuesday, Tesla, which dominates the electric car business in the United States, said it sold 1.8 million cars worldwide last year. , 38 percent more than in 2022.
Ford is expected to report its total sales on Thursday.