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Tribune News Service
Tribune News Service
Business
Kalea Hall

Cox Automotive increases its 2023 new-vehicle sales forecast

Analysts at Cox Automotive are expecting a much brighter year for U.S. auto sales in 2023 with an improvement in fleet sales leading to expected sales of 15 million, up from the previous prediction of 14.1 million.

The new forecast is an improvement from 2022's dismal sales total of 14 million, which was even below pandemic year 2020, when automakers sold 14.6 million. Sales last year were plagued by lower inventory levels as a result of supply chain issues.

Cox analysts expect U.S. new-vehicle sales volume will reach 7.65 million in the first half of 2023, an 11.6% increase from last year. Sales this month should come in at 1.3 million, up from 1.1 million in 2022.

The positive sales predictions rcome a week before automakers are expected to release their monthly and quarterly sales reports. They are welcome news for the industry, which entered 2023 with uncertainty about supply constraints and the state of the economy.

"I'm less worried about a downturn unfolding, especially in the second half of the year," Automotive Chief Economist Jonathan Smoke told media during a Tuesday discussion.

The sales increases are thanks to improvements in new-vehicle inventory levels, which are up more than 70% year-over-year in June. Days of supply improved notably, holding near or above 50 days for most of the first half of 2023, Cox analysts noted. By comparison, days of supply averaged closer to 35 days in the first half of 2022.

Fleet sales have underpinned the improvement this year, with initial forecasts showing they could increase by more than 40% year-over-year through the end of June. Meanwhile, retail sales, or sales to individual customers, are likely to show gains of about 3%.

General Motors Co. is expected to keep its title as the top automaker in new-vehicle sales through the first half of 2023. The Detroit automaker's sales should increase by more than 17% year-over-year in the first half of 2023, according to Cox.

Toyota Motor Corp., which has one of the leanest new-vehicle supply in the industry, will hold second place and come in slightly ahead of Ford Motor Co., Cox projects. Hyundai Motor Company, with Hyundai, Kia and Genesis brands, has become a standout in the market, Cox says, and with total sales, has passed Detroit's Stellantis NV to become the No. 4 automaker by sales in the United States.

Cox has been "pleasantly surprised by the strength of the new-vehicle market year to date," Smoke said. "Where we have supply problems are really actually more on the used-vehicle market. And that is a function of what happened in the new-vehicle side."

Since there were reductions in both new-vehicle leases and fleet deliveries, that reduced what was feeding the used market, Smoke explained. He expects it will take two or three years for the used market to start to see a recovery.

"We're not forecasting used retail to really recover until starting in 2025," he said. "We start to get back to 2019 levels around 2028. That's a function of the lack of younger vehicles available that are typically a driving part of the used market, especially the used retail market."

Affordability for new vehicles remains a concern with the average transaction price year-to-date at $48,564, up from last year's $46,512, and the average loan payment at $784, up from $691 last year, according to Cox. But automakers have increased incentives by about 10% over 2022.

"Affordability is bad. It absolutely limits the market," Smoke said. "My rough estimation is that we've probably lost 10% of the buying pool that existed in 2019 ... just literally priced out of the market at today's prices and credit conditions combined. But it's not getting worse."

He noted that incomes "have been growing strongly," and average transaction prices month-over-month declined from January through April and rose "modestly" in May.

"We're definitely at an inflection point that pricing is a bit more favorable for consumers," he said. "We would expect that as supply continues to grow, that a similar situation would continue to be the case."

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