The average interest rate on a new car loan hasn’t been this high in more than 20 years. Auto workers are on strike, making national headlines with the threat to strangle the supply of new cars. With conditions like that, you might expect new car sales to be slowing to a crawl.
They’re speeding up.
Car Sales Up 15% Despite All This
Kelley Blue Book parent company, Cox Automotive, forecasts that Americans bought 1.3 million new cars in September — an increase of more than 13% from last September. In the third quarter, sales are expected to surpass 3.9 million — a more than 15% increase from the third quarter of 2022.
Cox Automotive Senior Economist Charlie Chesbrough explains, “The market has faced high interest rates, real affordability issues, and ongoing inflation, which could have led to large declines in vehicle sales. However, pent-up demand has been fueling the vehicle market this year.”
Consumers and large fleet buyers have both contributed to year-over-year sales gains despite headwinds many analysts expected to slow sales.
Dealers Have Plenty to Sell
As Q3 draws to a close, industrywide inventory levels are up more than 63%. Some of that comes from the Big Three building up inventory to prepare for a strike. But not all of it. Sales incentives have increased notably from the start of the year as inventory builds, enticing more consumers into the market. Automakers wouldn’t likely offer these discounts if they weren’t confident they had plenty of cars to sell.
GM, Honda, Nissan, Tesla All Seeing Sales Growth
General Motors will continue to be the industry leader in sales volume in 2023, with year-to-date sales forecast to be higher by nearly 19% through Q3, Cox Automotive projects. Honda, Nissan, and Tesla are also projected to show significant sales growth.
The other large players, including Toyota, Ford, and Stellantis, are expected to underperform the industry through the first nine months.
Interest Rates, Strike Could Still Hurt Sales Eventually
High interest rates and the ongoing United Auto Workers (UAW) strike threaten sales success.
Cox Automotive Chief Economist Jonathan Smoke explains, “Limited inventory was the leading factor one year ago, but now it’s interest rates, the economy, and credit availability, which all make affordability more challenging. Ultimately, these are not good signs for demand continuing to be strong or improving in the fourth quarter.”
The UAW’s incremental “stand-up strike” strategy has seen it shut down just a few plants at first, with plans to ratchet up pressure by adding new sites to the strike as negotiations drag on. That, Smoke says, “has so far minimized the initial disruption, but the approach could enable a much longer disruption than has been possible historically.”
