Automakers Enjoy Strong Sales In First Half Of 2023 - The Detroit Bureau

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Automakers have something extra to celebrate for the Fourth of July holiday: new vehicle sales expected to exceed analysts’ forecasts for the first half of the year.

March sales fall — New vehicle sales are expected to exceed analysts forecasts for the first half of 2023.

Most analysts predicted sales for the full year 2023 would be between 13 million and 14 million units, with 6.5 million for the first half. However, the actual numbers are going to be closer to 8 million vehicles sold in the U.S. in the first six months, with the second quarter outperforming the first quarter.

“We came into 2023 concerned about affordability, supply constraints, and a fragile economy,” noted Cox Automotive Chief Economist Jonathan Smoke. “But the jobs market has remained healthy, and consumers have found a way to buy new wheels.

“As we close the first half, the market is showing signs of being more balanced, with smaller, more predictable changes in sales and less news about big price changes. A year from now, we might look back at this point as the beginning of a return to normal.”

Cox Automotive expects the first half to come in at 7.65 million vehicles, which will be 11.6% higher than the same period last year. Much of that is coming from better fleet sales, and that can only happen because inventory levels are on the rise.

Line of New Vehicles For Sale — Automakers have cut incentive spending, leading to higher prices — that’s expected to change in the second half of 2023.

More vehicles available

The past few years have been marked by volatility for automakers when it comes to its inventory levels, largely due to issues with the supply chain. The dearth of semiconductors has been well publicized, but there are materials and components shortages for multiple reasons, including Russia’s invasion of Ukraine.

Days of supply has also increased notably, holding near or above 50 days through much of the first half. In the first half of 2022, days of supply averaged closer to 35 days, Cox noted.

With vehicles available, dealers are moving them — fleet sales in particular. Initial forecasts suggest fleet sales could increase by more than 40% year over year through the end of June, as retail sales are likely to show gains of about 3%.

Q2 v Q1 — and beyond

Top down aerial view of many cars on a parking lot of supermarket or on sale car dealer market. — This is no longer the scene at dealerships across the country as inventory levels are getting back to normal levels.

The year got off to a strong start, but the second quarter has left it in the dust, with sales rising quarter over quarter by 13.8%, according to Edmunds.com. When compared to year-ago results, the second quarter of this year is up 16.1%.

“If you look at Q2 in the aggregate, new vehicle sales appeared to settle into a stable groove, which is a nice departure from the tumult that the industry has witnessed over the last few years. More consumers returned to the market with older trade-ins, which indicates that pent-up demand helped buoy sales,” said Ivan Drury, Edmunds’ director of insights. “But digging a bit deeper into the data, June tells a slightly conflicting story. After five consecutive months of increasing discounts and vehicles sitting on dealer lots for longer periods of time, June shows that those trends are stalling a bit.”

With the strong first half, most analysts are expecting a bit of a cool down for the second six months of the year, which Edmund’s Drury referenced with cars, trucks and SUVs sitting longer on dealer lots before being sold.

One issue driving the second-half slowdown will be credit availability. With interest rates rising, payments have been on the uptick. Demand has been high for a while so even with the higher rates, buyers with good credit have been largely unaffected. However, the next group of buyers aren’t quite so appealing to banks and finance arms, which will crimp sales a bit.

However, as demand drops so too will prices, helping out those with less-than-perfect credit later in the year as automakers add incentives to keep vehicles moving, analysts predict. Ultimately, the expected final sales tally for 2023 should be right at 15 million units, up from the 13.3 million to 13.7 million forecast by analysts.