Bad News For Bargain Hunters

Forecasters lowered their expectations for 2022 U.S. auto sales yet again, in a Cox Automotive webinar, to just 13.7 million new cars and trucks, down about 9% vs. 15 million in 2021, and down almost 20% vs. 17.1 million, in pre-COVID 2019.

The ongoing computer chip shortage and other supply-chain problems, which often have the COVID-19 pandemic as a root cause, get much of the blame, along with disruptions caused by the war in Ukraine, and higher interest rates.

The upshot for consumers is that new-vehicle prices are expected to remain at or near record highs. That’s the opposite of what usually happens when auto sales fall. What usually happens is that automakers and dealers raise incentives to stimulate demand, to sell off a backlog of inventory.

Today, with no backlog of unsold cars and trucks because of earlier COVID shutdowns and the chip shortage, there’s little or no pressure to offer discounts.

“As a result of the slow pace of the supply recovery, along with the rising threats to the economy from monetary tightening, we have lowered our sales forecast for 2022 – again,” said Charlie Chesbrough, senior economist for Cox Automotive, in the Sept. 28 webinar.

It was the third time this year Atlanta-based Cox Automotive cut its U.S. new-vehicle sales forecast.

Cox Automotive’s initial U.S. new-vehicle sales forecast for 2022 was 16 million, up about 7% vs. 15 million in 2021. The year 2022 got off to a good start, but the chip shortage and other supply problems that cut into auto production began to cut seriously into sales in May 2022, Chesbrough said.

“Our expectations for this year started with the idea that inventory would rebuild quickly, bringing higher sales with it,” he said. “But we had to adjust our thinking throughout the course of the year as the negative supply-chain effects of COVID and the Ukraine war did not subside.”

Earlier this year, the Cox Automotive forecast shrank to 15.3 million, then 14.4 million, to today’s 13.7 million, the company said. Greater likelihood of a U.S. recession is a contributing factor to the latest reduction in the sales forecast.

“With the economic outlook worsening quickly over recent months,” Chesbrough said, “it now seems likely that much of the pent-up demand from limited supply is quickly disappearing.”