If LMC Automotive analysts are right, next year will be another challenging one for U.S. auto dealers, though there will be some signs of recovery.
Consider just some of the top-line projections put forth last week by the forecasting firm in its latest global outlook for light vehicles.
On the upside:
- New-vehicle inventories will improve slightly. But they will remain under intense pressure as automakers struggle to secure microchip supplies.
- North American factories will produce nearly 2 million additional vehicles next year — still well below expected demand levels — but some of those will be from new electric vehicle players.
- U.S. sales are expected to rise from 15 million this year to 15.7 million in 2022, with short supplies still boosting pricing power.
And on the downside:
- Inflationary pressures are expected to stick around, pushing up costs and prices, though inflation as a whole is likely to stay in its historical bandwidth.
- The Federal Reserve is winding down its quantitative easing policy and signaling readiness to start boosting interest rates, with the first of at least three expected late next year.
- Ramped-up average transaction prices, driven by reduced incentives because of excess demand, are pushing some potential new-car buyers out of the market and into used models. Lower lease penetration and increased consumer purchases of vehicles coming off lease look to drive used-vehicle prices even higher.
What's all this mean for dealers?
"Dealer margins are going to stay strong on what they have to sell, but they're still not going to have much metal to move," Jeff Schuster, president of global vehicle forecasts for LMC Automotive, told Automotive News. Supply constraints, including with microchips, are "just a global issue, across different industries, and it's not going to get better anytime soon. I would say dealerships are probably going to have a hard time over the next 12 to 18 months."