Since the United Auto Workers strike officially ended, new vehicle sales across the nation appear to have rebounded ever so slightly, but experts agree those sales won’t reach any significant momentum going forward because vehicles are just not affordable.
According to S&P Global Mobility, November U.S. light vehicle sales are expected to recover from the strike-dampened sales levels of October, but they will lack any momentum for significant uptick. S&P Global Mobility projects 1.23 million vehicles will be sold in the United States this month, which would translate to a seasonally adjusted sales rate (SAAR) of 15.5 million units for the month, which is flat compared with the October SAAR level.
“While the end of the UAW strikes provides some potential relief to those automakers impacted, the ever-present affordability concerns remain prevalent for the foreseeable future,” said Chris Hopson, principal analyst at S&P Global Mobility, in a statement.
Hopson said over the next few months it is unlikely that auto sales will pick up from the current pace, “with the upshot being a bounce in early 2024 production creating a progression for inventory and incentive levels to develop come spring of 2024.”
The average price of a new car
The lack of affordable new cars has been underpinning sales since before the 46-day UAW strike that started Sept. 15, Hopson told the Detroit Free Press.
“With high interest rates … nothing is going to unwind quickly,” Hopson said. “We can get some inventory in here, but interest rates are still high and inventory is still low based on what we saw at pre-COVID levels.”
At the end of October, there were about 2.1 million new vehicles in inventory across all automakers, up from 2 million at the end of September, Hopson said.
Cox Automotive data showed that in October, with new-vehicle inventories on the rise despite the UAW strike, the average price paid for a new vehicle was $47,936, about $670 lower than the year-ago period, but well above pre-COVID-19 when it was about $36,000.
Despite the minor price dip from a year ago, rising interest rates make affordability impossible for many consumers. According to an October report by MarketWatch, the average auto loan interest rates across all credit profiles range from 5.07% to 14.18% for new cars and 7.09% to 21.38% for used cars.
Vehicle affordability will be an ongoing concern next year and beyond, Michelle Krebs, executive analyst at Cox Automotive, told the Detroit Free Press.
“Vehicle affordability has been and continues to be a major concern,” Krebs said. “High prices and high interest rates have caused about 10% of buyers who would typically buy a new vehicle to fall out of the market — maybe into used or out of the market completely.”
December year-end sales
Even sales of battery electric vehicles will level off. At the end of November, Hopson said EVs are expected to comprise about 7.8% of all new car sales, which is flat with October, but up from 6.5% in November 2022. EVs face the same high prices and high interest rates as gasoline-powered cars, he said.
Hopson said there will be a bounce in sales in December due to year-end clearance sales, but not enough to significantly restart sales momentum.
“All it’s doing is coming from outrageously high average transaction prices to just high average transaction prices,” Hopson said.
According to Ivan Drury, Edmunds’ director of insights, historically the pricey luxury vehicles sell well in November and December, but data shows that new vehicles priced above $50,000 are taking longer to sell than those priced under $50,000, indicating those shoppers of luxury vehicles are pulling back. Drury said, “the affordability and confidence in the economy overall is very sour.”
Drury said the strike impact on sales would be “nominal at best,” with affordability the No. 1 concern for shoppers, but General Motors has the leg up on Ford Motor Co. and Stellantis, which makes Chrysler, Dodge, Jeep, Ram and Fiat brands. GM offers the Chevrolet Trax and Buick Envista compact SUVs and “those look competitive and are priced closer to what people want to pay.”
The 2024 Trax starts at $20,400; the Envista starts at $22,400. But, Drury said, “unless it is incentives, a lot of those higher priced vehicles might end up collecting dust.”
More: Record number of car buyers paying $1,000+ per month amid low vehicle inventory
Contact Jamie L. LaReau: jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.
This article originally appeared on Detroit Free Press: UAW strike had minimal impact on sales, but price a problem for many