US new car sales fell 8% YoY to 13.7 million in 2022. It was the lowest level of sales in 2011. While markets expected automakers to be supply constrained in the year, demand worries too started surfacing in the back half of the year.
Between 2015-2019, US car sales were above 17 million annually. However, the COVID-19 pandemic took a toll on US automotive production in 2020. The global automotive industry lost billions of dollars in sales that year due to a shortage of parts, especially chips.
The automotive industry’s supply woes continued in 2021 but gradually got better in 2022. Until about the first half of 2022, US automotive demand looked quite strong. Inventory was low due to supply chain bottlenecks which coupled with rising inflation helped car makers increase vehicle prices at will.
Looking at the breakdown of US car sales last year, it was a mixed year for automakers. General Motors sold 2.27 million vehicles last year which was 3% higher than in 2021.
The company lost the crown as the largest automaker in the US to Toyota in 2021 as supply chain issues took a toll on its production. After the rise in 2022 deliveries, it reclaimed the top spot.
General Motors’ Car Sales Increased in 2022 while Industry Contracted
Meanwhile, the rise in General Motors’ 2022 deliveries came from a lower base as it was among the worst affected by supply chain issues in 2021. Most other automakers reported a fall in their 2022 deliveries. Nissan’s US sales for instance fell 25% YoY last year.
The US Federal Reserve raised interest rates multiple times last year. As a result, the interest rates on car loans are now at a two-decade high. This coupled with high car prices and macroeconomic uncertainty could take a toll on US automotive sales in 2023 as well.
Edmunds, for instance, expects US new car sales to be 14.8 million in 2023. While that would imply a YoY growth, it would still be lower than the pre-pandemic sales.
Meanwhile, electric cars remain a bright spot for the US automotive market even as sales growth has come down in recent months. Last year, EVs (electric vehicles) accounted for 6% of the total retail car sales which is twice the previous year.
While legacy automakers have also ramped up their EV capacity, Tesla is the market leader in the US EV market. It is also the largest EV seller globally. However, when we account for plug-in hybrid cars also, Berkshire Hathaway-backed BYD is the biggest seller of NEVs (new energy vehicles) globally.
Tesla Stock Crashed in 2022
In 2022, Tesla stock fell 65% and had its worst year ever. The company’s market cap plunged below $400 billion while its CEO Elon Musk lost $200 billion in net worth, becoming the first ever person to do so.
Tesla missed delivery estimates in 2022 and could manage only 1.31 deliveries while Musk had initially predicted that deliveries would be above 1.5 million.
Musk has categorically denied that Tesla is facing demand issues and said that the company is on track to increase its deliveries at a CAGR of 50% over the long term. Previously, he predicted that Tesla would deliver 20 million cars by 2030.
Analysts believe that the Inflation Reduction Act is a positive for Tesla stock as the company’s cars would now be eligible for the $7,500 tax credit. Cathie Wood of ARK Invest believes that Tesla stock would soar to $1,500 over the next five years. There is a guide on buying Tesla stock.
Many New Electric Cars Would Hit the Road in 2023
In 2023, many new electric cars, both from legacy automakers as well as pure-play EV companies, would be available for consumers. Tesla, for instance, might begin the deliveries of its Cybertruck in 2023.
The model would compete with multiple other electric pickups including F-150 Lightning from Ford, R1T from Rivian, and Endurance from Lordstown.
The battle between F-150 and Cybertruck would especially be worthwhile watching as the ICE (internal combustion engine) avatar of the former has been America’s best-selling pickup model for decades.
Due to the delays in the mass production of Cybertruck, Ford has taken the first mover advantage and started offering the F-150 Lightning in 2022. Ford stock also crashed in 2022 and even Adam Jonas, who is among the most vocal TSLA stock bulls, rates the stock as a buy. There is a guide on how to buy Ford stock.
All said, as consumers now get spoilt for choices while buying a new electric car, the industry might see a price war which would hurt the margins of automotive companies.
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