New Vehicle Sales Expected To Increase Significantly In First Half Of 2023

The industry experts at Cox Automotive, the world’s largest automotive services and technology provider, are forecasting U.S. new-vehicle sales volume will increase by 11.6 percent in the first half of 2023, reaching 7.65 million units. While closing quarterly reports from major automakers aren’t due for several more days, Cox is basing its estimates on a stronger-than-expected first half of 2023 — boosted by a large increase in fleet sales. Showing optimism on year-to-date activity, the company has raised its end-of-year forecast to 15.0 million units, which is strong, yet still below pre-pandemic sales levels (sales peaked in 2016 at 17.5 million units).

According to Cox, sales have been boosted by much stronger inventory levels in 2023 — dealers are carrying double the inventory this year compared to last, which is driving more showroom traffic. “Sales volume in June is expected to reach 1.3 million units, up from 1.1 million a year ago. The June seasonally adjusted annual rate (SAAR) is forecast at 15.2 million, an increase of more than 16% compared to June 2022, when new-vehicle inventory was less than half the current levels,” says the company.

“We came into 2023 concerned about affordability, supply constraints, and a fragile economy,” noted Cox Automotive Chief Economist Jonathan Smoke. “But the jobs market has remained healthy, and consumers have found a way to buy new wheels. As we close the first half, the market is showing signs of being more balanced, with smaller, more predictable changes in sales and less news about big price changes. A year from now, we might look back at this point as the beginning of a return to normal.”

New vehicle manufacturing, and the light vehicle supply chain, were shattered in early 2020 with the arrival of COVID. Inventory on dealer lots disappeared and was not replenished, which quickly increased prices (including markups over MSRP). But automakers ramped up production to fill the demand. According to Cox, year-over-year June inventory levels are up more than 70 percent. Supply days, which measure how many days of inventory dealers have on hand, are holding near or above 50 days — a comfortable reserve compared to previous levels.

While inventories have returned to dealer lots, prices have remained high as retailers squeeze as much profit as they can from each transaction. Interest rates are also high, as the U.S. Federal Reserve has significantly raised the federal funds rate to slow inflation. Despite the unfavorable interest rates (most consumers are paying 5-8 percent interest on new vehicle loans), consumers are still flooding showrooms. “The resilience of vehicle buyers in the face of historic increases in interest rates has been surprising,” said Cox Automotive Senior Economist Charlie Chesbrough. “However, maybe less surprising, but more than we expected, has been the industry’s return to old habits to move the metal. We expect that headwinds will grow in the second half of this year as credit availability and unfulfilled demand become scarcer.”