August, traditionally a significant month for car sales, has offered the auto industry a mixed bag of data. While there’s notable year-over-year growth of 17%, there are signs that the industry should approach with caution.
S&P Global Mobility reported that new light vehicle sales for August 2023 were expected to increase by a significant 18% from last year, so the reality of 17% wasn’t that far off projections. Some have even said sales would have been higher if not for the Florida and California Hurricanes. On the surface, this is positive news. However, when placed against July’s figures, the month-to-month growth is a modest 3%, despite two additional selling days.
Genesis, Honda, Hyundai, Kia, Mazda, Subaru, and Toyota reported significant increases. Toyota’s volume was up by 14.8% while Honda reported a 56.7% increase. KIA continued its fourth straight month of 70,000 sales. However, as excellent as the figures are, OEMs are beginning their incentives increases which could mean less sales predicted in the months ahead.
Daily Selling Rate & Market Softening
In raw numbers, a modest 3% growth equates to sales of around 1.34 million units, resulting in a seasonally adjusted annual rate (SAAR) of 15.2 million units compared to 15.7 in July.
However, while the industry celebrates sustained year-over-year growth, there are emerging signs of market softening. The daily selling rate, a critical metric which had its zenith at 54,500 sales per day in April, has begun a mild decline. And it has been reported that, on a year-over-year basis, compared to mid-August 2022, inventories have risen by 57% from just shy of 1.5 million vehicles,
Financial Challenges & Inventory Landscape
Chris Hopson, principal analyst at S&P Global Mobility, underscores the challenges, stating, “New vehicle affordability concerns will not be quick to rectify.” Dealerships and industry stakeholders need to be wary of rising interest rates, tightening credit conditions, and the plateauing of new vehicle prices.
From an inventory perspective, the numbers have remained consistent. Dealer-advertised inventories have hovered around 2.3 million units since July, showcasing an impressive 57% year-over-year increase.
Union Negotiations & Supply Chain Risks
Yet, potential challenges loom on the horizon. With contentious union negotiations now in progress, the possibility of disruptions in the North American vehicle supply chain is real.
Steady Trends in BEV Sales
On the electric front, battery-electric vehicle (BEV) sales trends are holding steady. BEVs are projected to account for 8.0% of August’s sales, in line with July’s figures. Ford reported a 61% growth of the Mach-E while Hyundai CEO Randy Parker, reported an 80% YoY growth of its hybrid and electric vehicles. The auto industry is set to roll out more BEV models, signaling a continued push for electric sales.
Growth Amidst Caution
As the industry navigates the rest of 2023, it will be imperative to keep a close eye on market trends, adapt to changing conditions, and prioritize the evolving needs of consumers and dealerships alike.
