The automotive market performed astonishingly well in 2023, exiting the year mostly unphased by inflation challenges, rising interest rates, labor strikes, and the electric vehicle segment’s disappointing performance. Now that January 2024 is out of the way, where do experts think the market go next, and will it remain as strong as it is now?
On this episode of CBT Now, host Shyann Malone is joined by Charlie Chesbrough, senior economist at Cox Automotive. Chesbrough has been a guiding voice for dealers throughout the COVID-19 pandemic, providing crucial insights into the automotive market’s current and future dynamics. Now, he discusses the car industry’s experiences in January and what they suggest about the months ahead.
Key Takeaways
1. January saw a typical dip in sales volume following December but remained flat from last year when adjusted for an extra sales day. This indicates a milder automotive market than anticipated, suggesting a cautious approach may be necessary for forecasting future market dynamics.
2. A notable decrease in average transaction prices by about 3.5% compared to the previous year is seen as a positive development for potential vehicle buyers. This reduction in prices could help address the affordability issues that have been a barrier to sales, indicating a shift towards an automotive market more favorable to consumers.
3. Inventory levels have significantly increased, rising about 50% year-over-year, offering buyers more selection and potentially boosting sales. The return of incentives, now accounting for about 6% of the transaction price, further supports the notion that conditions are trending towards a buyer’s market, which would be a sharp departure following the last several years of inhospitable environments.
4. EV sales continue to trend upwards, with expectations for continued growth in automotive market share through 2024. Despite mixed performance from major manufacturers, the overall outlook for EVs remains positive, supported by an increasing number of products entering the market.
5. Addressing affordability concerns is highlighted as a critical focus for dealerships. Emphasizing the potential savings from improved fuel economy, lower repair costs, and the enhanced safety features of new vehicles can help mitigate buyer hesitation due to high prices and interest rates. This strategy is essential for closing the first quarter strongly and adapting to current automotive market conditions.
"We can't say that the year started off with a bang. It was more of a milder market than what we were thinking we might get." — Charlie Chesbrough
