JD Power Auto Summit US Automotive Outlook

Doug Betts, President of Global Automotive at JD Power, and the President of Data and Analytics, Thomas King, took a look back at 2022 and set some data-based expectations for 2023. 

Data first. 

2022 carried on many of the changes we first saw in the pandemic. 

• Remote buying became necessary, but customers have been asking for a while. 

• Customer data shows many would prefer digital options across aspects of the buying process. 
• Data shows customers are more satisfied with their experience when they have access to their preferred online options. 

• Remote work spiked the demand for electronics, further straining the chip shortage, leading to manufacturing downtime and ultimately reducing auto industry inventory. 

• As inventory went down, profits went up.
• Some disruptions were disrupted, while others were leveraged to keep dealers competitive in the changing market. 

Data later. 

Despite an overall down year across metrics, 2022 ended with a solid pushback toward normalcy and health. 

• Sales were down -15%
• Transaction price grew +35%
• Incentive units dropped dramatically by -74%
• Consumer expenditures jumped +15%
• And dealer gross+F&I rocketed up +256%

And some more data.

Collected and considered the data suggest 2023 will be super dynamic with a high amount of uncertainty summarized in 4 key points. 

1. Pent-up demand. Among people and fleet companies over 7M sales opted to wait last year. About 2.4M retail and fleet buyers are still actively waiting for the right car or price. 
2. Production volume. Will there be more cars to go around? What quality will the vehicles be? If manufacturers continue to prioritize higher-value models, an over-saturation of these more expensive cars could damage profits by missing existing and new demand. 
3. Underlying new vehicle demand. Will supply exceeds demand? If new supply exceeds demand, used prices, trade-in values, and room for markups will all dip. 
4. Competitive asymmetry. Everybody was in the same boat about a year ago, so the competition was different. The competitive dynamic will also shift with a return to healthy inventory levels. Each of the other 3 factors will be more uncertain as brand recovery varies. The price-based competition will grow at every level. It is anybody's game.

What does it mean here and now? 

Sales are going to go up this year, but so are incentives. Gross and F&I revenue will decrease with an expected dealer profit dip from 2022's $55B to $28B. 

While a $27B reduction seems grim, Thomas King reminded attendees that at $28B, 2023 would still be the third-highest profit year the industry has ever had.