State of the 2022 Auto Market
By: James Flippin · January 05, 2023 · Reading Time: 3 minutes
Making a U-Turn
As 2022 kicked off, US automakers were expecting a strong year. This time last year, interest rates were at record lows and the supply chain was finally beginning to return to normal following the pandemic. That was all before Russia invaded Ukraine.
The Russo-Ukrainian war drastically hindered the automarket, exacerbating the chip shortage, creating a new shortage of auto parts, and causing a surge in material prices. Now, what could have been a banner year for car companies is shaping up to be their worst sales year in a decade.
US Auto Sales
Although some automakers still need to report their final earnings, experts predict total US auto sales to hit 13.7 million for 2022. This figure represents an 8% decrease from 2021 and will mark the lowest sales volume since 2011. For reference, pre-pandemic auto sales were around 17 million.
Not all manufacturers struggled equally. General Motors (GM) posted 2.74 million in annual sales, a 2.5% increase from 2021. This was enough to take the US auto sales crown from Toyota (TM), whose sales declined 9.6% last year. Other automakers reporting annual sales declines include Hyundai (HYMTF), taking a 2% tumble, and Nissan (NSANY), crashing by 25%.
Meanwhile, EV king Tesla (TSLA) posted a record year, with a 40% increase in annual sales to a total of 1.3 million deliveries, and even this impressive feat fell short of Wall Street expectations.
Time to Buy a Car?
Considering 2022 sales were softer than normal, consumers might be inclined to expect discounts from automakers to be on the table this year. But difficulty navigating inventory and the supply chain suggests that scenario may be less likely, even as demand sags.
What’s more, interest rates are expected to keep rising in 2023, which will make it more expensive to finance a new car purchase. Additionally, persistent inflation will likely keep eating away at household budgets, making it harder to complete the purchase in the first place.
While the state of the auto market fluctuates from year to year, you can protect yourself from whiplash with Warren Buffet’s simple, evergreen investing tip: “Price is what you pay; Value is what you get.” In other words, only buy a car — or anything else for that matter — when you’re getting great value for your money and the purchase fits within your budget.
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