Analysts at S&P Global Mobility expect U.S. car sales to rise by the end of October but have expressed concern for the automotive sector should manufacturing and economic headwinds continue further into the fourth quarter.
According to S&P Global Mobility’s forecast, U.S. car sales will reach 1.22 million by the end of the month, slightly ahead of last October’s total. This would place the seasonally adjusted annual rate for the period at 15.7 million units, almost unchanged from September and ahead of the 14.7 million seen in October 2022.
While these numbers may appear strong, the company is warning dealers against taking these projections at face value. “On the surface, with a projected SAAR result of 15.7 million units, October auto sales will be stronger than they appear,” stated S&P Global Mobility Principal Analyst Chris Hopson. “Underlying pressure by way of still-notable vehicle affordability concerns, potential economic slowdown and specific instances of severely limited inventory levels are likely to be a drag on auto sales for the remainder of the year.”
The UAW strike also threatens to slow down the pace of U.S. car sales, although the extent of this impact is up for debate. S&P Global Mobility estimates that union-related factory shutdowns have only prevented 150,000 vehicles from entering the market. OEMs have also ramped up production for other models, pushing the country’s new vehicle inventory levels to 2.5 million units by October 15. This represents an increase of 500,000 units in just over a month. However, if the strike were to expand to more facilities, the toll on manufacturing could rapidly increase, leading to another wave of vehicle shortages. This would exacerbate other ongoing issues, such as high interest rates, tightening credit access, rising inflation and low affordability.
Although the fourth quarter is likely to be a complicated one for the retail automotive sector, dealers can still look forward to heavy demand, given the overall pace of U.S. car sales in 2023. Nevertheless, expecting the market to absorb inventory pressures, production halts, low affordability and economic headwinds in perpetuity without flinching is still unwise. Now is the time for retailers to form the strategies needed to successfully navigate the upcoming months, regardless of how the industry landscape changes between now and 2024.