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2022 U.S. Auto Sales Fall to a Decade Low

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Last year, sales of light vehicles in the United States dropped to their lowest level since 2012 amid severe supply chain snarls and tight inventories. Per the Automotive News, U.S. light-vehicle sales in 2022 totaled 13.4 million units. The data takes into account the automakers that have released their sales data so far, barring a few like Mercedes-Benz, Porsche and Jaguar Land Rover that are set to report this week. In 2021, sales of U.S. light vehicles came in at 14.9 million units approximately.

The seasonally adjusted annual rate (SAAR) for December 2022 was 13.59 million, the lowest level since August. To put it in perspective, prior to COVID, SAAR had topped 17 million vehicles for five straight years from 2015 to 2019. While the global pandemic rattled the auto market in 2020, the supply deficit was the number one challenge in 2021. Just when industry watchdogs and auto giants were predicting the chip deficit to gradually start easing out from mid-2022, the geopolitical conflict between Russia and Ukraine triggered the second round of global microchip shortage. The war created ripple effects in the automotive supply chain and exacerbated the chip famine as raw materials got difficult to come by. While the demand for cars remained strong, automakers could not produce enough cars. Parts shortage choked supplies and low stockpiles impacted sales.New vehicle inventory in the United States, especially in the first half of 2022, was mostly running below 1 million units. While inventories started improving in the back half of the year, they are still way below the pre-pandemic levels. 

Before we discuss whether the road is likely to be any smoother this year, here’s a rundown of the 2022 U.S. sales report of auto bigwigs, including General Motors (GM - Free Report) , Ford (F - Free Report) , Stellantis (STLA - Free Report) , Toyota (TM - Free Report) , Honda (HMC - Free Report) and others.

A Glance Through the Sales Numbers

General Motors reclaimed the U.S. auto sales crown from Toyota in 2022. The U.S. legacy automaker sold more than 2.25 million units last year, up 2.5%. While full-year sales across its Cadillac, Chevrolet and GMC brands rose 13.9%, 5.6% and 7.3%, respectively, that of Buick tailed off 42.4% on a yearly basis.

In fact, General Motors was the only major auto giant, which reported a year-over-year increase in sales last year (apart from the electric vehicle [EV] king Tesla).

Japan’s auto giant Toyota came in second, delivering more than 2.1 million units last year. Sales contracted 9.6% from 2021 when TM defeated GM as the top-selling automaker in the United States. While sales of the namesake brand Toyota were down 8.8%, the Lexus division witnessed sales decline of 15% year over year. Importantly, RAV4 was U.S.’ best-selling SUV for the seventh straight year in 2022.

GM’s close peer, Ford, sold more than 1.86 million units in 2022, inching down 2.2% year over year. While sales of cars and trucks declined 29.4% and 5.5%, respectively, SUV sales registered 4.1% growth. Importantly, F-Series maintained its position as America’s best-selling truck for 46 straight years.

TM’s close peer Honda saw 2022 U.S. sales plunge 32.9% year over year to 983,507 units (with truck sales comprising 66.6% of the total volumes). Sales of the namesake brand and Acura dropped 28% and 39.2%, respectively. CR-V remained the best-selling vehicle of the firm for the 10th straight year in 2022.

Stellantis’ 2022 sales slid 13% to 1.54 million units, with Jeep, RAM, Chrysler, Dodge, Fiat and Alpha Romeo brands recording 12%, 16%, 2%, 12%, 61% and 30% fall in volumes, respectively. Sales at two of its major brands Jeep and RAM fell for the sixth straight quarter ending Dec 31, 2022.

While Stellantis sports a Zacks Rank #1 (Strong Buy), TM and HMC carry a Zacks Rank #3 (Hold). Meanwhile, General Motors and Ford are currently Ranked #4 (Sell) and #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

EV Sales Remain the Bright Spot

While the overall U.S. vehicle sales were down year over year in 2022, EV sales managed to maintain momentum. More than 807,000 EVs were sold last year in the United States. It accounted for 5.8% of total vehicle sales, up from 3.2% in 2021. Tesla was the clear winner and Ford emerged as the second largest maker of green vehicles, with full-year sales hitting a record 61,575 units, rocketing 126% year over year. Hyundai Motor was a close third, selling 58,028 EVs in 2022.

The EV race is only expected to get fiercer in 2023, as many new models are expected to be rolled out, including Kia EV9, Hyundai Ioniq 6 and General Motors’ Silverado EV among others. Cox Automotive expects EV sales to cross one million units in the United States for the first time this year.

Inventory Improving

Inventory levels in December came in more than one million units for the third consecutive month, per J.D. Power and LMC Automotive.  Per TrueCar, the total new light-vehicle inventory, including fleet and commercial vehicles, totaled 1.8 million last month, up from 1.1 million recorded in December 2021.

Cox Automotive notified that brands like Buick, RAM, Ford, Jeep, Volvo, Infiniti, Jaguar, Audi, Dodge and Lincoln Chrysler recorded the highest stockpiles last month. Meanwhile, brands including Toyota, Lexus, Honda, Subaru, Land Rover, Kia, BMW, Porsche, Hyundai, Volkswagen and Acura logged the lowest inventory levels. 

Affordability is the Pressing Concern for 2023

Just when new vehicles seem to be becoming more widely available, it’s to be seen if Americans wish to continue to splurge on these high-ticket items in the face of rising interest rates and recession worries.

To rein in the stubborn inflation, Fed became ultra-aggressive, cranking up borrowing rates repeatedly in 2022. Increasing costs of vehicle financing are making monthly payments less affordable for less-affluent and subprime consumers. With borrowing getting expensive and threats of a recession looming large, consumers are gradually starting to get apprehensive on buying cars. Resultantly, vehicle sales forecasts are getting slashed and automakers’ pressing concern is now shifting from inventory challenges to rising interest rates, which may erode demand with economic downturn around the corner. It's yet to be seen if automakers resort to better incentives, sweeter financing deals and discounts to hold up demand if customers get unwilling to shell more for these discretionary items.

Projections for U.S. light vehicle sales for 2023 sales range from 14.1 million to 15 million units. Well, that’s above this year but much below the pre-pandemic years. Edmunds estimates 14.8 million cars and trucks to be sold in the United States in 2023, well below the sales that automakers were registering in the previous decade.

Per a senior economist at Cox Automotive, much of the pent-up demand from the limited supply is gradually disappearing as high interest rates eat away vehicle buyers' willingness and ability to purchase. So, will the supply crunch morph into a demand slowdown in 2023? Quite likely.

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