Thomas King, President of Data and Analytics and Chief Product Officer at J.D. Power, presented the US Automotive Outlook.
Where We Ended In 2023
— Retail Sales ended the year at 12.7M, 1M behind 2019, but up from 2022.
— Transaction prices hit a new high, averaging $46K for new vehicles
— Retail profitability per unit dropped $1.3K from ’22-’23, landing at $3.3K per unit
— Total retailer profit also dropped in 2023 to $40B, down from $53B in 2022, but well up from $18B in 2019
— Total SAAR for 2023 was 16.3M, split 13.4M in retail, and 2.9M in fleet.
Some Concerning Numbers from December
— Monthly production ended at 1.45M units
— Inventory was at 1.6M
— Incentive spending was $2.6K per unit, up $1.3K YOY
— Trade in equity dropped $900 YOY, down to $8.4K
— The percentage of vehicles sold above MSRP was at 16%, down from 33% in Dec 2022
Overall, said King, “The industry is trending to pre-COVID norms, but, there is a long way to go.”
He also warned to be aware of industry averages, showing how many mainstream brands saw higher day supply throughout the year in correlation with increased incentives as a percentage of MSRP and decreased gross profits per unit.
Segments can be deceiving as well, with light trucks trending towards pre-Covid levels, but compact cars still doing extremely well.
King then turned to the 2024 outlook.
What to Expect in 2024
— SAAR of 16.1 M Units: 13M Retail and 3.1M Fleet
— Incentive spending $3.2K per unit
— Transaction price down to $44.9K per unit
— Dealer gross profit down to $2.1K per unit
— Projected $26B total Dealer profit
There is about 1.8M units of pent-up demand in the market. Lower interest rates will help ease that, but lower used car values will balance some of that out. King said that higher incentives and production mix adjustments to help affordability (i.e. more base models) are going to be necessary.
Lease maturities will also take a hit as we enter the third full year from COVID. In the first half of 2024, 1.8M leases will mature, up 21% YOY, but in the second half, only 1.3M will mature, a drop of 26% YOY.
King wrapped up his presentation by saying, “It won’t be easy as it has been, but there’s a lot of deals to be done and profit to be made.”