Supply Chain Instability and Interest Rate Hikes Cause 8% Decline
GM Regains Top Spot with 2.5% Increase in New Car Sales
Toyota Down 9.6%, Hyundai Down 2%
[Asia Economy Reporter Kwon Haeyoung] It has been estimated that the volume of new car sales in the United States last year fell to the lowest level in 11 years. This is the result of rising vehicle purchase costs due to semiconductor shortages caused by global supply chain instability and interest rate hikes.
The Wall Street Journal (WSJ) reported on the 4th (local time), citing joint data from market research firms JD Power and LMC Automotive, that approximately 13.7 million new cars were sold in the U.S. last year.
This represents an 8% decrease compared to 2021, marking the lowest figure since 2011 when 12.7 million units were sold during a gradual recovery from the global financial crisis. It is also significantly below the 17 million units sold in 2019, before the COVID-19 pandemic struck.
Global supply chain instability and interest rate hikes have hampered the automotive market. Semiconductor shortages have persisted since COVID-19, and essential parts procurement became difficult due to supply chain disruptions following the Ukraine war. Additionally, rapid interest rate hikes in the U.S. have increased the burden of purchasing new vehicles.
Charles Chesbrough, Senior Economist at Cox Automotive, analyzed, "Interest rate hikes are limiting demand in the automotive retail market," adding, "The sharp rise in vehicle prices and increased loan interest rates are reducing potential new car purchase demand."
Looking at sales by company, General Motors (GM) sold 2.74 million new cars last year, a 2.5% increase compared to the previous year. As a result, GM succeeded in reclaiming the top spot in U.S. car sales, which it had lost to Toyota in 2021.
On the other hand, Toyota's sales volume decreased by 9.6% compared to the previous year. Hyundai Motor Company saw a 2% decline, and Nissan's sales dropped sharply by 25%.
However, in the fourth quarter of last year, most automakers including GM, Toyota, and Hyundai recorded double-digit growth rates in new car sales. Hyundai's sales increased by 29% to 195,967 units, driven by rising demand for hybrid and electric vehicles. Notably, last month, sales of the compact sport utility vehicle (SUV) Tucson, the subcompact crossover utility vehicle (CUV) Kona, and the compact sedan Elantra grew significantly, resulting in a 40% increase in sales to 72,058 units.
New car prices last year soared to record levels. While consumer demand for new cars increased, supply chain instability led to a shortage of new car supply. According to JD Power, the average price of new cars in the U.S. in December last year was $46,382 (approximately 59 million KRW), close to an all-time high. This explains why U.S. automakers are believed to have increased profits despite a decline in sales volume last year.
The WSJ forecasted that the U.S. automotive market this year will unfold differently from last year. Although supply chain instability has somewhat eased, high interest rates and a potential economic recession could further suppress demand. If inventory increases, automakers will have no choice but to engage in discount sales to reduce stock.
Some view positive signs for the U.S. new car market this year.
Toyota projected total new car sales in the U.S. this year to reach 15 million units, explaining that low unemployment rates are boosting consumer purchasing power and that falling oil prices could stimulate new car buying desires.
Meanwhile, electric vehicles accounted for about 6% of the U.S. car sales market last year, doubling from 3% in 2021.
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