GM and other automakers are seeing prices rise and prices dampen sales growth

(Bloomberg) — General Motors Co. and several other automakers reported slowing U.S. sales growth toward the end of last year, while sales volume at rival Toyota Motor Co. remained strong, as near-record prices and high interest rates led to mixed impacts across the auto market.

Most read from Bloomberg

GM deliveries rose less than 1% in the fourth quarter, the company said Wednesday, as the automaker recovered from United Auto Workers strikes at four assembly plants in that period. Nissan Motor and Honda Motor saw slower growth at the end of the year, while sales of Korean automaker Kia America declined in the fourth quarter.

The pent-up demand that supported sales has subsided in the wake of the pandemic, and some shoppers are now rejecting 10% interest rates on auto loans and rates averaging around $48,000. Overall sales will likely fall to a seasonally adjusted annual rate of about 15.4 million vehicles in the final month of 2023, down from about 15.5 million in the previous two quarters, according to estimates compiled by Bloomberg.

“We have seen a significant decline in the number of middle- and low-income households” buying new cars, which “now goes almost exclusively to the top 20% of income households,” said Jonathan Smock, chief economist at Cox Automotive Research. interview.

However, there were pockets of flexibility. Toyota deliveries rose more than 15% in the last three months of 2023, helped by growth from hybrid electric vehicles. She added that sales of the Hyundai brand in South Korea increased by 5% during this period, which is a record number.

Toyota's big gains came from the Corolla compact hybrid sedan, which more than doubled, and the RAV4 small SUV, which rose 37% in the fourth quarter. The automaker attributed this strong showing to increased product availability in the second half of the year with declining supply chain and logistical issues, and to the launch of products such as the Grand Highlander mid-size SUV.

The story continues

“We hit our stride in the fourth quarter. We were able to get more of our new product to dealers,” David Crist, Toyota's U.S. brand president, said in an interview.

For Hyundai Motor's eponymous brand, the fuel-efficient and electric vehicle were the biggest growth in sales, with deliveries of the large Palisade SUV and Ioniq 5 EV nearly doubling in the quarter.

GM's sales rose just 0.3% in the quarter, with strikes at four plants cutting production of its best-selling Chevrolet Tahoe and GMC Yukon SUVs and full-size Chevy Colorado pickup trucks, among other models. A company spokesperson said it ended the year with a strong performance in December while replenishing inventory. Despite the strike, GM sales rose 14% during the year.

The Detroit automaker continues to struggle with electric vehicle production. GM had targeted 150,000 deliveries last year, but it actually sold just under 76,000 EVs, with most of the volume coming from the plug-in Chevy Bolt — a model GM is discontinuing in its current form. Production issues have affected the launch of vehicles made using the company's Ultium battery.

Nissan's sales gain of 5.6% in the quarter represents a sharp deceleration from its full-year performance, which was up 23%. Deliveries of the Sentra compact sedan were up nearly 42% in the last three months and over the year.

Overall sales slowed at the beginning of the quarter and then picked up in December, Jodi Wheeler, Nissan's U.S. vice president of brand sales, said in an interview. Lower interest rates should help ease financing costs and strong growth in dealer inventories at many manufacturers.

“Interest rates are starting to fall now,” she added. “It will make a big difference for consumers because they will have more money in their pockets now.”

Kia America said its sales fell slightly in the quarter to 60,275 vehicles, even though its sales for the year reached a record 782,000 vehicles.

Honda Motor Co.'s U.S. deliveries rose 31.5% in December, but that was below the automaker's 33% growth pace for the full year. It saw an 11.5% decline in sales of the premium Accord sedan, even as deliveries of the CR-V rose 88.2% – making it the best-selling crossover SUV on the market.

Continuing challenges

While 2023 was a significant improvement over 2022, which was plagued by inventory constraints, the challenges we saw at the end of the year are expected to continue. Cox Automotive expects U.S. auto sales to rise less than 2% in 2024. That means the number is unlikely to exceed 17 million in annual vehicle sales anytime soon, as it did for five straight years before the pandemic.

“The new benchmark for the industry due to lower affordability is closer to 16 million,” Smoke said. “We lost about 10% of total purchases.”

Automakers have no incentive to lower prices because they make more money from selling fewer cars. Consumer spending on new cars reached a record $578 billion in 2023, the third year in a row topping half a trillion dollars, according to researcher J.D. Power. J.D. Power said consumers' average monthly auto payment in December was estimated at $739, up $9 from a year earlier.

Toyota executives say the sticker price shock is forcing more car buyers to downsize when they trade in, and some consumers are choosing late-model used cars instead of new ones. However, they expect momentum to build towards 16 million in annual sales through 2024 as vehicle availability improves and other brands boost incentive spending to stimulate demand.

“There is a lot of optimism this year,” Jack Hollis, executive vice president of Toyota Motor Corporation North America, said in an interview.

(Updates from first paragraph with GM sales; added comments from executives from Nissan and Toyota.)

Most read from Bloomberg Businessweek

©2024 Bloomberg L.P