A top automotive research firm has forecast that new vehicle sales in the United States will reach the lowest first-quarter volume the country has experienced in a decade.
In a March 28 press release, Cox Automotive cites supply as the issue, with a chip shortage that remains a hardship for manufacturers. Higher inflation rates have pushed prices upward, leaving buyers leery or unable to buy a new car.
“Make no mistake, this market is stuck in low gear,” said Charlie Chesbrough, senior economist for Cox Automotive. “March [vehicle] sales volume will tick up from February, but this is not due to a substantial change in the market. Low unemployment, relatively low-interest rates — the conditions are right for higher sales. Sales remain weak and will basically be stuck at the current level until more supply arrives.”
Cox Automotive said vehicle sales could fall more than 24% from last March to about 1.22 million units. It predicts that quarterly sales for 2022 will drop more than 16% from the first quarter of 2021, with 3.9 million vehicles sold.
Quarter 1 2022 is forecast to end with 3.3 million units sold, marking the second-worst quarter for new-vehicle sales in a decade, behind only Quarter 2 in 2020, the height of the COVID-19 pandemic.
Some automakers are opting to produce more electric cars to meet the demands of consumers who are concerned with increased gas prices and want to take advantage of tax credits. However, this means companies are competing over the already limited computer chips needed to make them.
Forbes reported that as a result of the computer chip shortage, U.S. dealers had only about 900,000 units in inventory for March. This amount is far fewer than needed, according to Thomas King, president of the data and analytics division of J.S. Power.
Additional issues in the first quarter of 2022, including recent COVID-19 concerns in China, have complicated supply late in the first quarter.
For months, Americans have felt the pinch of new automobile supply issues due to lack of supply and record-high prices.
In November, The Dallas Express reported that Toyota announced it would lower production rates by 15%. Despite a decrease in production, Cox predicted Toyota could be the top-selling automaker in the U.S. for the first quarter of 2022.
Analysts from Cox told Reuters that automakers feel the effects of higher prices as purchases from those with lower incomes are not purchasing at the typical rate.
“Households with less than $75,000 in annual income now account for nearly two percentage points less of the U.S. light vehicle market than a year ago,” Chesbrough said. According to Reuters, the average income of a new vehicle buyer is now $124,000.
Officials indicated that the auto industry issues had led Cox to change its 2022 forecast for the United States. In January, Cox expected sales to reach 15.3 million vehicles this year, but the firm now forecasts that number to be down by 700,000.
“To reach this level by year’s end, the supply situation must begin to show significant gains next quarter and consistent improvement throughout the year, otherwise, another forecast adjustment may be necessary,” the release states.