The world runs on supply and demand, and supply, from corn to Camaros are still struggling after the global hit of COVID-19 lockdowns. Cox Automotive has readjusted its guidance for the year, and now says 2022 will see fewer cars sold than even 2020.
Car sales are expected to fall 17.3%, according to Cox Automotive. The auto data giant also revised down its full-year sales forecast from 15.3 million vehicles to 14.4 million units. That’s below the 14.6 million sold in pandemic year 2020.
There’s been nothing but bad news from Cox lately, it seems. Last week, Cox let us know that the average monthly payment for a new car had hit an astonishing $712. Use car prices are also at record highs. Analytics have been ringing the alarm bells on car prices for two years now, and there seems to be no end in sight, report:
The tightness of inventories continues to have a negative impact on sales of new vehicles. Since June 2021, monthly sales volume has been stuck in a narrow window, with little deviation, averaging 1.1 million units per month and only peaking at 1.3 million in June 2021. Without timeline clear for a notable recovery in new-vehicle inventory levels, Cox Automotive is lowering its full-year 2022 U.S. auto sales forecast to 14.4 million units, down from its current forecast of 15.3 million. Current forecasts now call for new vehicle sales volumes to fall below the 14.6 million sold in 2020, when the market was initially ravaged by the global COVID pandemic.
“Last June, I wrote that concern over the supply situation could not be overstated as we were in untested territory for the market,” said Charlie Chesbrough, senior economist at Cox Automotive. “This sentiment remains, as there has been no significant change in conditions on the ground since last fall. Even though economic conditions have deteriorated over the past few months, the lack of supply remains the most great headwind facing the automotive industry today.”
Tight inventories continue to be the cause. Sales have averaged just 1.1 million a month for a year now, and June sales are 7.5% lower than a year ago. The supply chain is still too tight for the taste of consumers and manufacturers. Ford had to stop production of the Mustang while GM suspended the construction of the Camaro just two months ago. It’s safe to say that these are two pretty big models for these automakers.
Some analysts, like Kevin Tynan at Bloomberg Intelligence, tHink automakers will never return to pre-pandemic levels of inventory. GM CEO Mary Barra said so much earlier this year, according to GM Authority:
“We will never go back to the inventory levels we were in the past,” Barra said in a recent online chat with Rod Lache, managing director of business analyst firm Wolfe Research, as quoted by The Detroit Free Press. . “In all the tragedy that has surrounded COVID, we’ve learned a lot about how to make our business stronger, how to operate more efficiently, how to work with dealers, how to use data analytics to make sure dealers are ordering the right vehicle. There are so many things we’ve learned to run more efficiently on that we’ll never be able to go back.
Translation: they are making too much money to increase their stocks now, even if they could.