Daily Management Review

Automobile Sales In The United States Likely To Decline As Less Affluent Purchasers Opt Out


The ongoing global shortage of semiconductor chips and the Russian invasion of Ukraine have reduced inventories of car companies in the United States during the first quarter of the current year. This has pushed up prices of new vehicles in the country which has resulted in the less affluent consumers of the country choosing to stay away from the market. Consequently, it is expected that the sale of new vehicles in the country could drop to its lowest for the first quarter of any year in the past decade.
This analysis was made by research firm Cox Automotive said Monday.
According to the firm, it expects a drop of as much as 24 per cent in the sale of new car and light truck sales in the United States, expected to be about 1.22 million units by the end of March. That would be a drop of 16 per cent for the quarter compared to the same quarter the previous year.
"Make no mistake, this market is stuck in low gear," said Charlie Chesbrough, senior economist at Cox Automotive, adding that sales will remain at current levels until supply improves.
According to the forecast of Cox, the US economy will not enter a recession in the near future. However, Cox also lowered its 2022 its prediction for the sale of new cars and light trucks to 15.3 million cars, compared to its prediction of sale of 700,000 units that it had made in January this year. Even meeting the revised goal will necessitate considerable reductions in supply chain disruptions, according to Cox.
Supply bottlenecks that had been lessening in recent months have resurfaced as a result of new Chinese lockdowns and Russia's invasion of Ukraine. Due to a scarcity of new vehicles, prices have reached new highs. During a conference call, Cox analysts claimed that less affluent consumers are leaving the new vehicle market, hurting Detroit's mainstream brands and Nissan Motor Corp.
According to Chesbrough, American households that have earnings of less than $75,000 a year now account for roughly two percentage points less of the US light vehicle market compared to their participation in the market a year ago. A new vehicle buyer's average income is currently $124,000.
Chevrolet and other Detroit mainstream brands are losing market share, while Cox predicts that Toyota will be the top-selling carmaker in the United States for the first quarter.
"Long-term, you are shrinking the pool of people who are likely to buy" a new vehicle, said Cox Chief Economist Jonathan Smoke.