Auto Industry Insiders “Cautiously Optimistic” for 2023 After Sharp Sales Drop in 2022

?After a year in which automotive sales dipped to their lowest totals in over a decade, industry executives are confident that a turnaround could be coming in 2023.

“We’re cautiously optimistic about the future,” Jack Hollis, EVP of Toyota Motor North America, said this past week. “In 2023, there will be an uptick not quite as high as we would love it to be but going in the right direction. Demand is still higher than our supply.”

Just under 14 million vehicles were sold in the United States during the 2022 fiscal year, according to recent industry figures and estimates. This marks the lowest composite sales figure since 2011 and represents an 8 to 9% decrease in units shifted from 2021.

Before the pandemic, total sales regularly crossed the 17 million thresholds. Now following a near 10% decline in units shifted from 2022, automakers hope that a reduction in supply chain and parts issues will send the number climbing closer to its previous norm.

According to insiders at both GM and Toyota, automotive sales could easily rise back to over 15 million units in 2023. This falls roughly in line with forecasts from Edmunds and S&P Global Mobility (14.8 million).

It’s an interesting time for such optimism. Consumer spending and consumer spending intentions have been on a steady downward trend in recent months due to fears of a recession, inflation concerns, and a sharp rise in interest rates. However, industry insiders are pointing to consumer demand left over from 2020 and 2021 as a reason for confidence.

During the pandemic, new vehicle buyers were vexed by reduced inventories and long wait lists. Many industry insiders are banking on leftover demand to buoy new automobile sales in 2023 as inventory levels start to creep back to their previous levels.

And if that doesn’t materialize as executives hope, there’s always the prospect of fleet sales to rental car companies and governmental agencies. According to Hollis, “fleet demand is very high” and could help to offset flagging numbers in the consumer sector if need be.

This would be a welcome sight for most major automakers. Other than General Motors, which posted a modest 2.5% gain in vehicle sales, most companies saw slight to significant downturns in 2022. Kia, Hyundai, and Toyota all saw their unit sales decrease by a few percentage points. Nissan, Honda, and Stellantis were not so lucky, with all three companies posting double-digit percentage point losses.

According to Charlie Chesbrough, senior industry analyst for Cox Automotive, such optimism could be misguided if the automotive industry doesn’t radically rethink its approach to pricing.

“This is one of those rare times where we really have no idea which direction the market could go,” Chesbrough said recently. “It could easily go up or down from where we’re at right now. The pace over the last couple of months has been definitely pointing to a weakening market.”

If gas prices continue to climb and inflation continues to halt consumer spending, Chesbrough warns that the alarming numbers from the 2022 fiscal year could very well be the start of a worrisome industry trend. This is especially true if the country enters a full-blown recession in the coming months or years.

Chesbrough isn’t alone in his stark assessment of the situation at hand. Many Wall Street investors and analysts are worried that 2022 was indicative of a greater problem for the automotive industry -- one that could lead to “demand destruction” for many automakers if inventories begin to outstrip demand. Skeptics point to a drop in used vehicle prices and aforementioned economic concerns for countries around the world as reasons to brace for a potential worst-case scenario.

As for now, automobile industry execs are hoping for the best. And with actual vehicle sales numbers skewed by companies that don’t make such figures available to the public, it’s possible that 2022 was more of a one-year anomaly than anything else -- one made more troublesome by a lack of complete information than anything else.

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