U.S. auto sales rebounded strongly in 2023 after two years of declines, according to year-end sales figures released this week by major automakers. However, analysts warn the industry faces significant challenges in 2024 that could dampen sales growth.
GM Leads 2023 U.S. Auto Sales, EV Momentum Builds
General Motors led all automakers in total 2023 U.S. auto sales, moving 2.6 million vehicles for a 14% gain over 2022. The performance marked GM’s best sales year since 2019, before the pandemic disrupted the auto industry.
GM’s growth was driven in part by booming demand for electric vehicles. The automaker’s EV sales nearly doubled as buyers snapped up new models like the Chevrolet Silverado EV pickup and GMC Hummer EV SUV. Overall, U.S. EV sales are estimated to have risen 80% in 2023 to over 800,000 vehicles.
“Consumer demand for EVs is strong and continues to grow,” said Steve Carlisle, GM executive vice president. “With our portfolio of interchangeable drive architectures and Ultium battery technology, we will continue to expand customer access to EVs.”
Toyota, which held the sales crown from 2021-2022, fell to second place as its sales grew just 1% amid parts shortages. Hyundai-Kia posted record U.S. deliveries on surging demand for its new and redesigned SUV models. Industry analysts estimate around 15.5 million new vehicles were purchased in the U.S. last year, up 12% from 2022.
Consumers Shake Off High Prices, Interest Rates
The auto sales rebound comes despite significant economic headwinds. Prices for new vehicles hit record highs last year due to low inventories and supply chain issues. The average new car transaction price topped $48,000 in late 2022, up 14% from a year earlier according to J.D. Power.
Surging interest rates also threaten to dampen demand in the coming year. The average new car loan rate recently topped 7% for the first time since 2002. But for now, consumers seem willing to stomach higher monthly payments to get their hands on the latest model SUVs and trucks rolling off assembly lines.
Dealers offered discounts and attractive financing offers to juice year-end sales. And buyers appear confident enough in the economy to make large purchases.
“Consumers are saying ‘I need a vehicle, I have to get to work’,” said Jessica Caldwell, Edmunds executive director of insights.
Labor Strikes Cloud Outlook for Detroit Automakers
While the Detroit Three automakers posted healthy sales last year, labor unrest threatens to disrupt production and profits in 2024. The United Auto Workers (UAW) union launched strikes against equipment manufacturers that supply GM, Ford, and Stellantis late last year.
The work stoppages idled numerous parts factories that the automakers rely on. As parts inventories dwindle, analysts warn GM and Stellantis could soon be forced to halt production at some North American auto plants. That could further constrain inventory and sales growth.
“The strikes couldn’t come at a worse time for the auto industry,” said Michelle Krebs, executive analyst at Cox Automotive. “Vehicle supplies are already low and price tags are high.”
Several analysts downgraded earnings forecasts for the major automakers due to fears over the strike impact. Resolution of the labor disputes will be key for Detroit automakers to capitalize on strong consumer demand in 2024.
Industry Faces Myriad Threats This Year
While the U.S. auto industry starts 2024 on a high note, significant obstacles loom that have dampened optimism. In addition to ongoing supply chain snags and production cuts tied to strikes, surging interest rates threaten to price more buyers out of the new car market.
Rising rates not only increase monthly payments, they make it costlier for dealers to carry vehicle inventory. That’s led some analysts to predict average new car transaction prices could finally peak and even decline this year if demand softens.
There are also concerns over the resilience of the U.S. economy amid high inflation and a potential recession later this year. If unemployment rises or consumer confidence sinks, big ticket purchases like vehicles are likely to take a hit.
Most analysts believe U.S. auto sales will decline in 2024, though demand is expected to hold up reasonably well barring a deep economic slump. Maintaining profitability while navigating the tricky terrain ahead poses a major test for automakers.
“Last year was likely the peak for this business cycle,” said Jeff Schuster, president of global vehicle forecasts at LMC Automotive. “Now headwinds are lining up and building steam.”
Outlook for Leading Automakers
- GM in pole position after reclaiming U.S. sales crown in 2023
- Strike impact threatens production disruptions in near term
- EV portfolio & technology investments position automaker for growth
- Struggled with inventory & saw sales growth vanish last year
- Known for resilience through ups & downs of auto cycles
- Lexus luxury line faces stiffer competition from Germans & EVs
- F-150 pickup continues as America’s bestselling vehicle
- Mustang Mach E paving way for more affordable EVs
- Parts shortages, strike risk cloud near term production
- Benefitted from revamped & new Jeep SUV models
- Strike puts significant pressure on profits near term
- EV strategy lagging American & European rivals
- Estimated 340k U.S. sales in 2023, +60% growth
- Demand outpacing production capacity for Model Y & 3
- Watch battery costs & competition from legacy automakers
- Korean automakers took U.S. market share in 2023
- Stylish SUV lineup clicked with younger buyers
- Recession resilience untested amid growth spurt
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