High Prices Persist, Even Though Automakers Build More Cars And Trucks In 2022

LAS VEGAS — Automakers can probably build an additional 2.6 million to 3.2 million vehicles this year vs. 2021, but even that many vehicles won’t cut it, in terms of bringing supply back in line with demand, forecasters said.

In other words, high prices will likely persist all this year, and maybe all next year, too, because demand continues to outstrip supply.

“This is going to be a better sales environment than last year,” said Thomas King, president, Global Automotive, for J.D. Power. “More vehicles are going to be produced, and more are going to be sold.”

Just not that many more, King said, at the J.D. Power Summit here on March 10, held in conjunction with the NADA Show, the annual convention and trade show of the National Automobile Dealers Association.

Auto production dropped sharply in 2020 and 2021, due to the COVID-19 pandemic, a shortage of computer chips, and other supply-chain problems. As a result, there’s more than enough pent-up demand from consumers, and from commercial fleets, to soak up higher production in 2022 and 2023, he said.

“All this pent-up demand gobbles up all the increased production, which makes it really hard to increase the inventory,” King said. “This environment is basically going to stick around for some time.”

What King means by “this environment” is low inventory, record-high prices, and correspondingly low discounts.

The inventory of new cars and trucks available for retail sales has fallen to fewer than 1 million cars and trucks, from 2.3 million before the pandemic, J.D. Power said.

King forecasts annual production for the U.S. market in a range of 15.9 million to 16.5 million cars and trucks for 2022, or 17.4 million to 18.3 million in 2023. Even the low end of the range, that would be a big improvement vs. 13.3 million in 2021, or 13.8 million 2020.

However, at the low end of the range in King’s recovery scenario, the net number of vehicles in inventory doesn’t get any better through the end of 2023.

At the high end of the range, inventory could get as high as about 2 million by the end of next year, he said. But that’s nowhere near enough to account for the last two years’ worth of “lost” sales.