January auto sales are off to a strong start, but they show a possibly altered retail situation for dealers. The automotive industry is facing a variety of unexpected but impactful trends. While demand is slowing down, the industry is still seeing solid gains, mainly due to the rise of fleet sales over retail sales.
January indicates that we’re seeing a shift that might continue into the rest of 2023. Which automakers fared well, and how will this new landscape of automotive demand possibly shape the rest of this year? See our takeaways below:
January is projected to start the year strong
According to Cox Automotive’s projections, January auto sales volume is estimated to rise 2.7% from 2022 and end at 1.03 million units. While there was a significant drop compared to December 2022 at 19.8%, the annual sales pace is projected to finish around 15.6 million, a substantial rise from 13.3 million in December last year.
It also looks as if retail demand is severely cooling. Month-over-month numbers for each class of cars are projected to see double-digit decreases in purchases, with Compact SUVs and Crossovers seeing the smallest fall at -17.5%.
More: January car sales highlights: Toyota shrinks, Honda improves, Hyundai surprises
Only one major automaker seemed to lose footing in January
Most of the major automakers reported gains in January. Subaru, Hyundai, Kia, Honda, and Ford saw year-over-year increases of 0.5%, 9%, 22.3%, 14.3%, and 2%, respectively. Subaru celebrated six months of month-over-month sales rises, while both Hyundai and Kia noted best-ever sales months for various models.
Ford had both great and lackluster news this month. While they did see higher year-over-year sales and quite a few of their models experienced sales growth, they did have an 18.4% sales drop when compared to December. A notable well-performing brand from last year, Toyota, was one of the only automakers that didn’t have the best month, with them experiencing a “notable drop,” according to Cox Automotive.
Dealers may need to shift from retail to fleet sales
According to Cox Automotive, auto loan rates for new cars have risen to 8.41%, a notable increase from 5.30% in January 2022. The average used rate rose from 9.40% in January last year to 12.88% this year. In December, the estimated monthly payment was $777, a record-setting number.
These numbers have likely led to a cooling of demand, with many car buyers probably having to put a vehicle purchase on hold. As a result, Cox expects many dealers to change their audience to fleet buyers. Fleet sales have been increasing since late last year and might be the group that helps to keep the automotive industry afloat in 2023 for dealers.
January auto sales have provided a solid introduction to 2023 for the automotive industry. However, dealers will likely have to contend with a customer base dealing with rising vehicle pricing and interest rates. This situation will likely lead to dealers changing their approach and expanding their audience past retail. If affordability continues to be an issue, pivoting for dealers will probably have to continue throughout the year and possibly beyond.
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