Ten years from now, when we look back on the years immediately following the 2020 coronavirus pandemic, we will be in awe of the dramatic changes and unprecedented circumstances that the economy and auto market endured. It will be. We’ve seen historic increases in car values, an unimaginable decline in supply, and interest rates rising at a relentless pace from record lows to 23-year highs, to name a few. The past four years have been chaotic even by auto industry standards, upsetting many of the normal seasonal patterns and making it even harder to predict what will happen next.
Still, the process of creating forecasts is important work, and one that my team and I enjoy working on every year. At Cox Automotive, you have access to the best data and sharpest insights in the industry. Based on that, we’ve developed a number of themes for the year ahead that provide an overall vision of what’s to come in the next 12 months. While our specific forecast numbers may prove wrong, we hope these themes will provide further valuable perspective on the path forward.
The Cox Automotive Economic Industry Insights team believes the market will be guided by five key themes into 2024.
1. Low growth will continue in the future, but we will surely overcome the recession.
For 2024, we forecast weak growth in the economy as high interest rates and rising-to-downward inflation combine to constrain consumer spending and slow employment and income growth. Cox Automotive is counting on an economy that avoids recession in 2024 and continues to grow slowly and subduedly. The labor market, a key driver of auto sales in the U.S. market, is expected to weaken, but unemployment will remain low enough to support the health of the auto industry. Wage growth will slow in 2024 but remain above average.
In mid-December, the Federal Reserve held its final meeting of 2023 and decided to keep interest rates and overall monetary policy unchanged for the third consecutive time. The Fed hasn’t given up on the possibility of raising rates, but the new language suggests further rate hikes are just an option, not an expectation. By the end of 2023, the Fed’s median forecast sees three-quarters of a point potential decline Even if small, the cuts would improve car affordability and provide some relief to many needy households.
Overall, we expect consumer debt to increase modestly in 2024 and credit conditions to remain tight but stable. Although consumer spending will slow down in some areas, it should remain healthy enough to support subdued growth. Overall, next year’s economy may be boring, but it will certainly break through the chaos of recession.
2. Automobile supply will recover, favoring consumers and putting downward pressure on prices.
In the wake of the global pandemic and subsequent gridlock in the global auto supply chain, a shortage of new cars has completely disrupted the U.S. auto market, driving prices to record levels and restricting auto sales. This will have a long-term impact on the market.
Fortunately, Cox Automotive expects inventory to increase significantly over the next year from the height of the shortage in 2022, and expects incentives to increase as well as discounts. Overall affordability will limit what is possible in both the new and used car markets, but as household incomes rise and loan rates stop rising (and perhaps even fall some), new and used As vehicle vehicle prices react, affordability will continue to improve due to the market’s undeniable downward price pressure.
We expect new car inventories to approach pre-pandemic norms in 2024, reaching nearly 3 million vehicles, three times the low point of the chip shortage, and daily supply to remain healthy. Return to normal. Increased inventories will support higher incentives, but they will still fall short of the record levels last seen in 2019 (a market of more than 17 million new cars).
The Cox Automotive team currently expects U.S. new car sales to increase by less than 2%, ending at 15.7 million units.1 Retail new car sales are expected to remain almost flat, and fleet sales are expected to recover from a lull at the end of 2023 and continue to improve.
New car transaction prices are likely to see another modest decline, similar to this year, and will be more deflationary than the typical 2.5% to 3.0% seen from 2013 to 2019. The driving force behind the price decline is likely to be an increase in discounts based on consumer decisions. Pay according to manufacturer’s suggested retail price. This trend, along with further incentives and continued income growth, will improve the affordability of cars for consumers. But in 2024, affordability will limit the market and become an industry-wide challenge, with new car sales well below the historic highs seen between 2016 and 2018. At the time, the market was artificially inflated with deep discounts and incentives, and near-zero car loans. Fee.
The used car market is expected to rise in 2024, but the increase will be minimal at less than 1%. Total used car sales could reach 36.2 million units, and retail used car sales were 19.2 million units, an increase of 1% year-on-year. We expect certified pre-owned vehicle sales (CPO) sales to outpace used vehicle growth, reaching 2.7 million vehicles, an increase of 3% from 2023. Although there is demand, product availability is limited due to production shortages from 2020 to 2022.
The Manheim business expects volume growth to be less than 1% as subdued growth continues. Although the number of foreclosures, rentals, and off-leases is up year-over-year, it remains below pre-pandemic norms. Price patterns will continue to normalize, and he predicts 2024 will be the first year of near-normal price declines in five years.
Overall, as our team projects for 2024, we expect inventory recovery to continue and sufficient pent-up vehicle demand to help prevent the new vehicle market from retreating in the face of headwinds. I am building a model. High loan interest rates and low growth environment.
3. In 2024, we will officially say goodbye to the seller’s market.
Dealer profitability peaked in the years immediately following the pandemic, but is expected to decline further in 2024. Incentives and discounts will continue to expand, but vehicle prices aren’t coming down, just margins are being squeezed. Rising material and labor costs, along with more expensive technology and a focus on wealthy buyers, are driving up both the manufacturer’s suggested retail price (MSRP) and the invoice price paid by dealers, resulting in lower product prices. It’s getting more expensive. However, increased supply and increased discounts will suppress transaction prices paid by buyers, lowering profit margins and hurting profitability.
In 2024, dealers will need to seek greater efficiency to protect their bottom lines. The good news is that used car margins and fixed operating income will remain relatively strong over the coming year. But while MSRP and invoices are trending upwards, buyers are likely to pay less, putting the new car sales sector under pressure. For many dealers, thin margins will be swallowed up by rising floorplan costs and the need to reinvest in infrastructure to support rising electric vehicle (EV) sales. Looking ahead to 2024, dealers are less optimistic about the future, with all focus on interest rates and declining profits.
4. In the electric vehicle market, 2024 will be the year of more models, more incentives, more discounts, more advertising, and more sales power.
That’s already happening, and dealers and manufacturers alike are realizing that more effort is needed to sell more EVs.Expectations for EV growth in the US market start fromrosy reality” As EV sales increase, customer acceptance is slowly widening. Prices are falling and most automakers are increasing inventories.
Cox Automotive’s team believes that by 2024, the industry will have fully accepted the fact that while the benefits of electrification will have to be sold to the average consumer, many will not be easily convinced. I expect it to be deaf. But with more models, more incentives, more discounts, more advertising, and more sales power, EV sales in the US in 2024 will surpass the 1 million units achieved in 2023. We still believe that sales will surpass this record and many more will follow. Accounts for more than 10% of total sales. The mix of hybrid models will further advance, pushing the share of electric vehicles such as EVs, plug-in hybrids, and hybrids to nearly 24% of the market by 2024.
Changes in guidelines may result in fewer EVs qualifying for IRA tax credits, but federal incentives will continue to encourage consumers to purchase electric vehicles, and electric vehicle leasing will continue to increase as well. , is expected to increase from about 20% to 25%. , an increase of 5 percentage points.
Market leader Tesla’s share of total EV sales will continue to decline as industry pioneer Tesla loses market share while increasing sales. And the nascent used EV market will continue to be the fastest growing product segment in the wholesale/used car market.There will be many more used EVs on the market, but this will only happen in 2024. further years When it comes to EVs.
5. Buying a car in America: Average is better.
After four years of unusual conditions, Cox Automotive expects balance to return to the U.S. auto market in 2024. And it will clearly be better for U.S. consumers and fleet buyers who want more choice, better deals, and access to better online purchasing tools. . In fact, in many ways, 2024 is expected to be the best year for car buyers since the pandemic.
Our research shows that in contrast to 2018 and 2019, when consumers valued “access to transportation” more, Americans now value purchasing/owning personal transportation more. I found out that And after a slump in 2021 and 2022, satisfaction with the car-buying process is expected to improve over the next year, thanks in part to increased inventory and a return to discounts, but with time savings and a Thanks in part to improved processes at dealerships that make purchasing easier. More efficient.
Overall, we expect revenue growth to be subdued and weak in 2024, which is a bit more normal compared to the turbulent past three years. As an economist, it’s always interesting to see fluctuations in economic trends that make headlines, but such disruptions are rarely good news for business in the long run. Yes, we are closely monitoring the political situation, hoping for a quick resolution to the wars in Gaza and Ukraine, watching how the presidential election goes, and closely monitoring the Fed’s actions, but today from our vantage point and Swan phenomenon – the car market in 2024 is predicted to be fairly normal unless new blacks join. It may not make headlines, but it should come as a welcome relief to everyone involved.
1 Following the final analysis of 2023 sales, the full year 2024 forecast was updated to 15.7 million units on January 8, 2024.
Jonathan Smoak
chief economist
Jonathan Smoak leads Cox Automotive’s Economic and Industry Insights team, which tracks key metrics and trends impacting both wholesale and retail automotive markets based on proprietary data from the company’s businesses and platforms. doing. For his 28 years, Smoke has focused on translating data and trends into relevant, actionable insights in the industries where consumers make the biggest purchases of their lives: real estate and automobiles. Smoke joined Cox Automotive in 2017.