Demand slows in November as plunging vehicle affordability impacts the market

Here are the takeaways for November’s projected auto sales: 

A Fairly Successful Year-Over-Year Performance 

Cox Automotive projected an almost 11% year-over-year (YOY) increase in November. However, the actual numbers might come in slightly below estimates. The sales numbers will likely settle at a SAAR of 14.1 million units instead of 14.3 million, which is still better than the 13.1 million sales of the previous year. However, while sales will be slightly better than in 2021, it’s likely to be a 4.2% decrease compared to October 2022. 

What’s Leading to the Slowing Demand?

In early 2022, a lot of the sluggish new vehicle retail numbers were due to low supply. However, supply for some automakers is gaining new ground, while other issues are creeping up to impact sales numbers. An automotive industry report from JD Power-LMC Automotive found that high vehicle prices and interest rates have led to a lull in demand. 

In November, the average monthly payment was $712, which is a 7.2% increase compared to the same time last year. Affordability issues like these are likely leading to consumers slowing their spending. 

Most Automakers Did Well — Small Cars Continue to Grow in Popularity 

Hyundai’s sales increased by 43%, while Kia saw 25% year-over-year increases. Also, according to Cox Automotive, Mazda, Toyota, and Subaru saw success in November. Much of the gains with these brands had to do with better supply and product availability. On the other hand, brands like Honda struggled and saw noticeable declines in November. 

But, EVs (electric vehicles) did bring another victory for the automotive industry. Namely regarding Ford’s EV success. YOY EV sales were up 100%, while gasoline car sales declined comparatively. They are now the second-highest EV seller in the U.S., behind Tesla. 

Much like in October, smaller vehicles are seeing YOY increases. All vehicle types are projected to have seen month-over-month declines except for mid-size, compact, and compact SUV and crossover vehicles. These vehicle types saw YOY increases of 25.8%, 17.2%, and 34.6%, respectively. Full-size pickup trucks and mid-size SUVs saw YOY sales drop by 4.4% and 1.6%, respectively. Fluctuating gas prices and the hefty price tags of larger cars might be driving consumers to size down their car purchases. 

Final Thoughts 

The automotive industry has entered a new phase — likely due to increased prices and decreased consumer confidence. As we move into the rest of the year and 2023, consumers may continue to decrease spending and show interest in smaller cars and vehicles that prioritize alternative fueling — like EVs. If prices continue to climb, consumers from all income brackets may slow their purchases in the short and long-term.