February 9, 2023

Sales of new cars and trucks likely fell to their lowest level in a decade last year as a global shortage of computer chips and rising interest rates pushed up the cost of car ownership.

Analysts expect the U.S. auto industry to sell fewer than 14 million light trucks and cars in 2022. This equates to more than 1 million fewer vehicles than in 2021. The industry sold more than 17 million new vehicles in 2019 ahead of the coronavirus pandemic.

Automakers began reporting year-end sales totals on Wednesday, and if the gloomy forecast holds, last year’s totals would be the lowest since 2011, when the industry was just beginning to recover from the financial crisis, selling 12.7 million new cars and trucks

“Rising interest rates now appear to be limiting demand in the retail auto market,” Charles Chesbrough, senior economist at market research firm Cox Automotive, said in a statement. “With prices hitting record highs and lending rates rising, potential new car buyers is shrinking.”

Toyota, the world’s largest automaker by sales, said on Wednesday its U.S. sales fell about 10% to 2.1 million vehicles. But fourth-quarter sales rose 13% compared with the same period in 2021, the company said, pointing to an improved supply of chips and other components towards the end of the year.

GM is one of the few automakers bucking the trend, reporting a 2.5% rise in U.S. sales last year to 2.3 million vehicles. Sales rose 41% in the fourth quarter, the company said.

Full-year sales of GM’s electric vehicle, the Chevrolet Bolt, rose more than 50 percent to 38,120 vehicles. The company also said sales of the GMC Hummer, an electric pickup that costs more than $100,000, rose to 854 units. GM has said it aims to phase out internal combustion engine vehicles by 2035 and is counting on several new electric models to boost sales this year.

South Korean automaker Hyundai, which sells vehicles under the Hyundai and Kia brands, reported a 2% drop in U.S. sales this year, but said deliveries jumped 29% in the fourth quarter.

Tesla on Monday reported a 40% increase in global sales in 2022, but its deliveries in the final three months of the year fell short of analysts’ expectations. The company’s stock, which has fallen 65% in the last year, fell about 12% on Tuesday.

Rivian, a smaller electric vehicle company, said Tuesday that it is hundreds of miles short of its goal of producing 25,000 trucks, sport utility vehicles and vans by 2022.

Other established automakers are expected to report sharply lower sales for 2022 when they release Ford’s totals later Wednesday and Thursday.

The auto industry has been hampered over the past three years: first by the coronavirus pandemic, which forced manufacturers to shut factories for two months in 2020, and then by a shortage of computer chips that has disrupted global auto production since early 2021.

The chip shortage eased last year but still caused some automakers to sometimes slow down or temporarily stop production. For electric cars and trucks — the fastest-growing segment of the industry — many automakers are also struggling to get enough batteries. That means some buyers have been waiting months for certain models, such as Ford’s F-150 Lightning and GM’s Hummer pickup truck.

Many consumers are eager to buy new cars but are avoiding showrooms because a shortage of chips drives up prices, or because the cars they want aren’t available. The Federal Reserve’s campaign to raise interest rates to slow inflation has also effectively increased the cost of buying a car, since many people have to borrow money to buy a new car.

U.S. consumers paid an average of $47,681 for a new car in November, the most recent month for which data is available, according to Edmunds, another market researcher. That’s an all-time high, up from $45,872 in November 2021.

“Rising interest rates are increasingly at the top of consumers’ minds in every aspect of their lives, including auto loans,” said Ivan Drury, director of insights at Edmunds. It would also add thousands of dollars.”

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