Auto Industry Recap: 2022 Sales Totals and 2023 Predictions

Crunching the numbers reveals a few trends expected to carry into the new year.

Unlike 2020 and 2021, it’s difficult to nail down one major issue for the auto industry this past year. The challenges were multi-faceted and often interconnected.

Inventory and parts shortages, along with record inflation, caused new vehicle prices to skyrocket. This, in turn, helped push up insurance rates and pile onto car owners’ growing maintenance costs – which were already aggravated by stubbornly high gas prices and an ongoing automotive technician shortage. Adding fuel to the fire is the fact that many automakers are practically bleeding cash right now as they attempt to transform their fleets with electric vehicles and innovative new technology.

Traffic fatality rates continue to rise. Recalls are at their highest levels ever. The UAW is still battling corruption allegations. Elon Musk bought Twitter.

Needless to say, it’s been quite a year. But the industry is still standing – and it remains decidedly open for business.

A Look At The Numbers

The latest counts place total new-vehicle sales just above 13.7 million units. This is down 8% from last year’s 15 million, and marks the lowest total in over a decade.

Microchip shortages and supply chain snarls are largely to blame for the decline, as automakers simply could not ramp up production to meet demand. Levels improved slightly in the fourth quarter — totals reached 3.5 million units, a 9.6% increase from Q4 2021. However, experts say supply still isn’t high enough to satisfy the consumer market.

The hunger for new vehicles persists even as price tags add new zeros. Cox Automotive places the average transaction price at a walloping $49,507 this December, yet another new record. In fact, data reveals that 15.7% of consumers who financed a new vehicle in Q4 2022 committed to a monthly payment of $1,000 or more.

High loan rates are putting on the pressure too. The Federal Reserve issued seven rate hikes in 2022, with more planned for 2023. The attempt to curb consumption will certainly deter some folks. Bankrate data indicates the national average for a 60-month new auto loan started the year at an average 3.86%, and ended at over 6%. The company expects an increase to 6.9% in 2023 – and an even higher 7.75% rate for four-year used car loans. Those with less than ideal credit scores will fare worse, staring down 8-9% interest rates.

In good news…

The yearly national average price of gas in 2023 is forecast to drop nearly 50 cents per gallon from that of 2022 to $3.49, according to GasBuddy’s 2023 Fuel Outlook.

Old is New

Used vehicles also endured a rollercoaster ride in 2022, with wholesale values finally just stabilizing after reaching sky-high levels at the start of the year. List prices are coming back to earth as well, dropping 4% from the end of 2021 to an average $27,143 in December 2022.

While many Americans are still seeking new and new-to-them vehicles, many more are perfectly content to love the one they’re with. In May, IHS Markit (now S&P Global Mobility) reported the average age of light vehicles in operation in the U.S. rose to 12.2 years – an all-time high. This spells good news for the aftermarket, which will thrive on vehicle owners’ maintenance needs and customization wants.

Power of Choice

Despite the challenges, automakers still managed to deliver exciting new and revised models this year, including the Chevy Corvette Z06, seventh-gen Mustang, Toyota GR Corolla, fifth-gen WRX and peppy Impreza RS.

Truck lovers enjoyed the most attention, however, as manufacturers diverted resources to the profitable segment. In 2022 alone, we saw next-gen iterations drop for the Chevy Colorado, Nissan Frontier, and Toyota Tundra; met the new electric Ford F-150 Lightning; and experienced the first-ever Silverado ZR2.

According to John Murphy, lead automotive analyst at Bank of America Merrill Lynch and author of Car Wars, an annual study of U.S. product pipeline, automakers are poised to launch 240 new model vehicles by 2025. That translates to roughly 60 new vehicles each year.

As expected, the light truck segment will lead the charge. More than half will be crossovers, with SUVs and pickups representing about 20%. Murphy estimates 117 new CUVs will hit the market by 2025, which may finally “pressure OEM profitability in the segment as the market gets increasingly crowded and price competition emerges.”

Growing Market for EVs

While still significantly more expensive than their ICE counterparts, EVs picked up in popularity this past year. KBB estimates sales volumes surpassed 800,000 for the first time, a 65% increase over 2021, with total market share jumping from 3.2% to 5.8%.

Tesla still dominates the segment but is quickly losing its chokehold. The Ford Mustang Mach-E is gaining speed – as are the Hyundai Ioniq 5, Kia EV6, and the Chevy Bolt EV/EUV. While pricy, both the Rivian R1T and Ford F-150 Lightning have captured consumer attention as well.

Big investments were made in the EV market this past year, both by automakers and the federal government. Battery manufacturers and automotive groups announced a massive number of new battery plants and retooled manufacturing complexes, with many expected to be up and running as early as 2025.

Recent EV tax credit changes made as part of the Inflation Reduction Act will likely push this development even further. To qualify for the full $7,500 credit, vehicles must be assembled in North America with the majority of the battery components coming from the U.S. or from countries that have free trade agreements with the U.S. Those sourcing requirements will increase to 100% by 2029. Additionally, the bill disallows any batteries after 2023 to have Chinese components.

In an attempt to curb higher list prices (and avoid subsidizing the purchases of those people with big bank accounts), the credit does not apply to vehicles that cost more than $80,000, and is only available to individual buyers with an income of less than $150,000 or family income of less than $300,000.

Between the growing power-of-choice and attractive incentives, Cox Automotive anticipates EV sales will crack 1 million in the U.S. for the first time ever in 2023.

Self-Driving Reality Check

This past year saw some major advancements in the world of autonomous driving – like Cruise’s approval to charge for driverless taxi rides in San Francisco, and the autonomous trucking industry’s expansion to real world testing.

However, these achievements also shared the stage with some high-profile setbacks.

• Those same Cruise robotaxis found themselves in a number of embarrassing situations during 2022, including but not limited to: being pulled over by police, defying software protocols and clustering together at intersections, blocking emergency vehicles, and causing at least one accident.
• A pretty damning J.D. Power study revealed an alarming lack of consumer understanding around not only self-driving cars, but also everyday driver assistance tech like lane-keep assist and automatic emergency braking.
• And Tesla’s inaccurately-named “Auto-Pilot” and “Full Self-Driving” software have come under serious scrutiny, prompting investigations by the California DMV, NHTSA, and even the Justice Department.

The largest blow, however, likely came from the sudden announcement that Argo AI shut down. Backed by Ford and VW, the Pittsburgh-based startup seemed to have a very bright future ahead of it. Its inability to secure new investors – or deliver on its promises – not only caused the business to go bust, but also dulled the shine on Silicon Valley’s incessant optimism around autonomous vehicles.

2023 Predictions

If the pandemic taught us anything, it’s that making long-term predictions is a fool’s errand. Apparently, we are but foolish humans because we’re going to attempt to do just that. Maybe don’t etch these in stone, though?

Continued inflation will likely lead to recession.

Even with the Feds’ planned rate hikes for 2023, most economists feel a mild recession is in the cards. At the very least, plan to tighten the purse strings as prices get higher and loan terms grow less favorable.

Tight inventories are the ‘new normal.’

When inventory levels tanked last year and vehicles began selling over MSRP, dealers enjoyed record profits. Likewise, many automakers were forced to adopt build-to-order strategies, which resulted in higher margins for them too. Neither party will be looking to eliminate extra money, so it may be time to get used to less variety on the dealership lot and longer delivery times.

Heightened tension between automakers and dealers.

The two parties may be in agreement on inventory levels, but we predict automakers will push for even more control over the ordering process. Several manufacturers have been quite vocal about their interest in transitioning to a direct sales model for EVs, which would significantly lessen dealership’s independence. Consumers will undoubtedly like the sound of easy online ordering and fixed non-negotiable prices, but OEMs won’t be able to cut dealers out of the equation without a fight.

Hybrids will have a good year.

Hybrids remain a solid transitional vehicle for folks who are interested in electric power but not quite ready to commit to full BEV, or who live in an area that cannot adequately support ownership. Additionally, with microchips and battery sourcing growing more difficult, full BEVs may be harder to come by and will certainly grow more expensive.

As a result, we expect more people will eye up the technology. And companies like Toyota – who actually caught flak for investing in hybrids alongside EV development – may just see their multipronged strategies pay off.

More battery innovation.

Necessity is the mother of invention and as noted, the demand for cheap, reliable battery technology is high. We saw some interesting advancements in 2022, including new long-range battery tech, a viable solar-charging car, breakthroughs in faster charging, new recycling initiatives, and even the exploration of sourcing materials from the sea floor. (Though that last one hasn’t proved its environmental safety yet.) We expect innovation to continue pushing forward at breakneck speed, as new companies vie to secure those patents.

More recalls.

2022 was a banner year for recalls, both because quality is down and detection is better. As J.D. Power’s Initial Quality Study revealed back in July, pandemic disruptions in production contributed to record-high vehicle problems. In fact, compared with 2021 results, the industry experienced an 11% increase in problems per 100 vehicles.

Ford had a particularly rough go of it last year, issuing 67 individual recalls, which is 22 more than the next highest manufacturer. While the company pledges to double down on quality, it expects fixing the issue will take a few years – so maybe plan to be visiting your dealership if you drive a Ford.

As for other brands, their recall numbers will likely increase as well. It’s simply easier to find problems these days. Thankfully, innovations like over-the-air (OTA) updates also make it easier to apply fixes.

More data concerns.

As cars become smarter and more connected (like in the case of those OTA updates) personal driver information is more at risk. Just last month, computer engineers found a major hacking loophole between certain vehicles and Sirius XM radio. Left open, it could have allowed cybercriminals to remotely control certain car functions.

We expect to see more weaknesses like this exposed, and possibly even see a few big breaches, as automakers, dealerships, and third-party manufacturers work to shore up their defenses.

Carvana may finally implode.

Online used-vehicle retail is a convenient option, and one that consumers should absolutely have in today’s day and age. But it requires transparency and competence – two things Carvana has proved it lacks.

The company has continually failed to properly transfer titles and registrations for sold vehicles, leading to license suspension in several states. On top of consumer allegations of faulty and unsafe vehicles, including the sale of a stolen car(?!), investigators found evidence of fraudulent behavior among employees.

Even if the company could bounce back from the stink of criminal negligence charges, it faces more than $6 million in debt and a 98% drop in its stock. With more people sure to lean on the used vehicle market in the shaky economic days ahead, we not only predict but actively celebrate the dissolution of a company that shows a complete disregard for consumers’ financial wellbeing and overall safety.

Stay tuned as we have more round-ups and recaps scheduled in the weeks ahead.