Market slides 8% in 2022; forecasts vary on 2023 recovery

The U.S. auto industry finished 2022 much the way it started — a mixed bag — delivering a comeback for a few automakers and brands, but a rough stretch for many others, including Japan's Big Three, to forget.

General Motors and three of its brands rallied in the final sprint of the year. Stellantis, Nissan Group and American Honda, continue to struggle with lean inventories and supply issues. Ford and Lincoln snapped three-month losing streaks with higher December sales. Toyota Motor Corp. posted slightly higher volume and Hyundai and Kia capped a year of U.S. market share gains with double-digit sales gains in December as industry stockpiles continued to recover, even amid rising interest rates and new-vehicle prices, and the growing prospects of an economic slowdown.

U.S. auto sales rose 7.3 percent to 1.28 million in December, according to LMC Automotive, helped by moderately higher inventory levels and robust fleet shipments. December volume was also the high point of the year, LMC said. But the month capped a year that saw industry volume drop 8 percent to below 14 million to the lowest level since 2011.

December retail sales tallied around 1,057,000, flat with December 2021, while fleet shipments accounted for approximately 225,000 units, well above forecasts, representing 17.6 percent of light-vehicle volume, LMC said.

Severe cold and heavy snow across a huge swath of northern states late in the month also likely undermined retail activity as 2022 closed, analysts said.

The seasonally adjusted annualized rate of sales for December came in at 13.59 million, Motor Intelligence said, above the range of forecasts — 13 million to 13.3 million — from LMC Automotive, J.D. Power, TrueCar, Cox Automotive and S&P Global Mobility. That is well above December 2021's 12.9 million pace but the SAAR has struggled to top 15 million since July 2021, except for readings of 15.3 million in January 2022 and October 2022.

Overall, fourth-quarter sales rose 9.8 percent.

While analysts expect U.S. sales to increase in 2023, the wide range of forecasts — from 14.1 million to 15 million — underscores the clouds hovering over the industry.

"Auto consumers are plagued by an uncertain economic environment, high vehicle prices, higher interest rates, and low inventory levels," said Chris Hopson, principal analyst at S&P Global Mobility.

The National Automobile Dealers Association, citing data that inflation is cooling and consumer sentiment has bottomed out, but remains low, on Wednesday forecast 2023 U.S. sales will rise to 14.6 million. But it warned affordability, driven by higher new-vehicle prices and interest rates, will remain a drag on the market.

“Despite pressures on the economy and consumers’ wallets, new-vehicle demand remains elevated,” NADA Chief Economist Patrick Manzi said in a statement. “With the worst of the chip shortage behind us and new vehicle production set to increase, new vehicle sales are expected to improve in 2023 after declining last year.”

A handful of brands generated U.S. sales gains in the down year that was 2022: Mercedes-Benz, Porsche, Rolls-Royce, Cadillac, Chevrolet, GMC, Genesis, Rivian, Tesla and Polestar. Tesla ran away with the U.S. luxury sales title for the first time.  

Overall, just a handful automakers — BMW Group, Ford Motor Co., Hyundai Motor America, General Motors, Kia, Mercedes-Benz, Subaru and Tesla — gained share in 2022.

General Motors, driven by strong light-truck deliveries, reported a 42 percent increase in fourth quarter light-vehicle volume, with sales rising 44 percent at Chevrolet, 42 percent at GMC and 75 percent Cadillac. Buick was the only GM brand to post lower volume in the final quarter of 2022, down 6.5 percent, extending the brand's declines to six consecutive quarters.

GM also reclaimed the title of top-selling automaker in the U.S. in 2022 by nearly 150,000 units after Toyota Motor grabbed the crown in 2021. GM, the market's longtime leader until 2021, reported U.S. deliveries of 2.258 million last year, up 2.5 percent, while Toyota Motor sales tallied 2.1 million, down 9.6 percent.

GM said U.S. dealer inventories continue to rebound and have more than doubled over the last 12 months, finishing December at 410, 682 units, including cars and light trucks in transit, up from 359,292 at the close of the third quarter and 199,662 at the end of 2021.

December deliveries rose 3.5 percent at Toyota Motor, with a 6.6 percent rise at the Toyota division offsetting a 16 percent decline at Lexus. Both brands continue to be hampered by some of the industry's lowest inventory levels, with Lexus sales now dropping 11 straight months. Toyota, the leading brand in the U.S. since April, lost the title in December to Ford by some 10,000 units.

At Ford Motor Co., December volume increased 3.3 percent behind gains of 2.7 percent at the Ford division and 17 percent at Lincoln. The No. 3 automaker in the U.S. finished 2022 with sales of 1.86 million, down 2.2 percent.

Ford said U.S. sales of the F-Series truck tallied 653,957 in 2022, making it America’s best-selling truck for 46 consecutive years and the best-selling vehicle for 41 years straight.

The company said it finished 2022 with gross inventory of 398,000 cars and light trucks, or a 60-day supply, with 45 percent of it in transit, up from 372,000 units at the close of November and 247,000 at the end of 2021. 

Stellantis said fourth-quarter volume skidded 16 percent behind a drop of 18 percent at Jeep, 39 percent at Chrysler and 15 percent at Ram. Only Dodge posted a sales gain, 15 percent, in the final quarter.

Volume also declined 25 percent or more at two of the company's smaller brands: Fiat and Alfa Romeo. Sales at Jeep and Ram, FCA's biggest brands, have now dropped six consecutive quarters. Stellantis' overall U.S. deliveries dropped 13 percent in 2022.

Jeff Kommor, head of U.S. sales for Stellantis' FCA US unit, cited "production constraints and a disruption of parts and materials in general," as well as "market conditions that carried across 2021 into 2022," for negatively impacting the company's results.

Honda Motor Co., still struggling to secure chips for key models to rebuild depleted stockpiles, said December sales dropped 11 percent, with the Honda division down 11 percent and Acura off 5.5 percent. The company's 2022 sales skidded 33 percent, the steepest decline among major automakers last year. The company said it is starting 2023 with about 44,000 new vehicles in dealer inventory and has advised dealers that stockpiles won't return to normal levels untill fall 2023 at the earliest.  

“Like the rest of the industry, we aren’t out of the woods yet with supply issues," said Mamadou Diallo, vice president of auto sales for American Honda Motor Co. "But we begin 2023 with roughly double the on-hand inventory of 2022 and the expectation that this will mean a healthy sales increase this year.”

Nissan Group's fourth-quarter U.S. sales dropped 2 percent to 191,012, with the Nissan brand off 3.6 percent, its sixth straight quarterly decline, while Infiniti deliveries rose 24 percent.

Volume jumped 40 percent last month to a December record of 72,058 at Hyundai Motor America, driven by a 27 percent rise in retail deliveries. Hyundai said it was its fifth straight month of record retail sales, with utility vehicles accounting for 74 percent of retail volume.

While it finished the year with five consecutive monthly sales gains, Hyundai's 2022 U.S. sales tallied 724,265, a 2 percent decrease compared with 2021. The company said it ended December 2022 with 37,379 cars and light trucks in U.S. inventory, down slightly from 39,898 in November but up from 21,420 at the close of 2021.

At Kia, sales rose 25 percent to a December record of 60,422, its fifth straight monthly advance. The company posted U.S. sales of 693,549 in 2022, down 1.1 percent from 701,416 in 2021.

Subaru posted its fifth consecutive monthly increase, with December volume up 11 percent but down 4.7 percent for the year. Mazda racked up its third straight monthly gain with a 41 percent increase in December volume, but finished the year down 11 percent.  

Genesis Motor America also reported record December sales — 6,172, up 23 percent — helping the brand finish the year with volume of 56,410, up 14 percent.

After demand bounced back following the early months of the COVID-19 pandemic, automakers struggled to rebuild inventories throughout 2022 because of a shortage of microchips and other supply-chain bottlenecks.

Higher interest rates and new-vehicle prices are now making it more expensive for consumers to finance a purchase, forcing some to delay buying or consider a used car, even as job growth remains healthy and consumer confidence rebounds. TrueCar estimates fleet deliveries also rose 46 percent year over year to 175,317 across the industry in December.

"There were fewer giant red bows than dealers would have liked in December," said Charles Chesbrough, senior economist at Cox Automotive. "Given the large improvement in supply levels, it seems likely that rising interest rates are now constraining demand in the retail auto market. With record-high prices and elevated loan rates, the pool of potential new-vehicle buyers is shrinking."

Retail stockpiles in December tallied more than one million units for the third straight month, J.D. Power and LMC Automotive said, while TrueCar estimates total new light-vehicle inventory, including fleet and commercial stock, stood at 1.8 million in December, up from 1.1 million in December 2021. The brands with the highest stockpiles last month were Buick, Ram, Jeep, Volvo, Infiniti, Jaguar, Dodge, Lincoln Chrysler, Audi and Ford, Cox Automotive said, while Toyota, Kia, Lexus, Land Rover, BMW, Honda, Subaru, Porsche, Hyundai, VW and Acura had the lowest inventory levels. 

December discounts rose slightly compared to November but remain very low. The average incentive per new vehicle was on track to drop 21 percent from December 2021 to $1,187 last month, J.D. Power and LMC Automotive said. Incentive spending per vehicle expressed as a percentage of the average vehicle MSRP was 2.5 percent last month, down 0.8 percentage points from December 2021, J.D. Power and LMC Automotive projected.

TrueCar estimates incentives averaged $1,121 per new vehicle last month, down 41 percent from December 2021 but up 4.5 percent from November.

To counter rising interest rates, some automakers are waiving payments and down payments for 90 days, or dangling finance rates as low as 1.9 percent for 60 months on certain models for eligible consumers.

"As inventory continues to build, many [automakers] are starting to feel pressure to incentivize, especially with winter storms and rising interest rates keeping more folks on the sidelines," said Justin Colon, a vice president at TrueCar.

New-vehicle transaction prices continue to rise but at a slower pace than early in 2022. The average transaction price in December was on pace to set a record of $46,382, a 2.5 percent increase from a year earlier, J.D. Power and LMC Automotive said. TrueCar pegged average transaction prices in December at $45,628, up 2.1 percent from December 2021 but up just 0.9 percent from November 2022 levels.

• There were 27 selling days last month, the same as December 2021, but two more than November.
• More consumers are committing to monthly payments of $1,000 or more. Edmunds said 15.7 percent of consumers who financed a new vehicle in the fourth quarter agreed to a monthly payment of $1,000 or more — a record — compared to 10.5 percent in the final quarter of 2021 and 6.7 percent in 2020's final quarter.
• Buyers are placing more money down on a new vehicle to offset rising costs. The average down payment for a new car or light truck hit a record high of $6,780 in the fourth quarter, Edmunds said.
• Leasing accounted for just 18 percent of retail sales in December, J.D. Power and LMC Automotive said.
• Average interest rates for new vehicle loans were expected to increase to 6.4 percent in December, 247 basis points higher than a year earlier, J.D. Power and LMC Automotive projected.

“For the first time in a year and a half to two years, customers are backing out of some pre-sold vehicles and there are cars hitting the lot that aren’t pre-sold. Interest rates for new cars have gone up significantly.” — David Christ, head of Toyota Motor Corp. brand sales in the U.S.

"As we head into the new year, the industry shows signs of reverting to old customs. Markups are being reduced, incentives are inching up and a larger proportion of sales are allocated to rental fleets — all normal indicators after what has been an abnormal few years." — TrueCar analyst Zack Krelle

"Even with the probability of an economic downturn, pent-up consumer demand from the past two years will keep inventory levels relatively low. Therefore, 2023 is likely to be another year of relative healthy pricing and profitability." — Thomas King, vice president of data and analytics at J.D. Power

Bloomberg contributed to this report.