Halfway Into 2023 New Car Sales Are Booming Even As Prices Stay High

Good morning! It’s Wednesday, July 5, 2023 and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.

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1st Gear: Supply And Price

New cars may be too expensive — more expensive than they’ve ever been — but automakers’ sales volumes still broadly climbed in the second quarter as supply chain constraints finally stopped holding vehicles back. We’re looking at a 12-to-14 percent rise in overall sales through the first half of 2023 per The Wall Street Journal, and that’s left manufacturers and dealers with no incentive to bring prices down:

“Consumer confidence is still there, mostly because there has been that backlog of supply for so long,” said Scott Kunes, chief operating officer of Wisconsin-based Kunes Auto and RV Group, which sells most major domestic and foreign automotive brands.

The brisk demand has helped to keep the average dollar amount that buyers are paying for new wheels at near-record levels, despite predictions from Wall Street analysts that prices would come down as more vehicles arrive at dealer lots. The average price paid rose 3% over the first half of the year, and was about $46,000 in June, according to J.D. Power.

“People are continuing to buy up” to choose pricier models and features, General Motors finance chief Paul Jacobson said last month at a Deutsche Bank investor conference. […]

Last month, Cox Automotive said it would raise its full-year U.S. vehicle-sales forecast to 15 million vehicles, from its previous estimate of 14.1 million vehicles.

The increase has been driven by surprisingly strong demand from both individual buyers as well as businesses and other commercial customers, said Cox’s Chief Economist Jonathan Smoke.

Still, persistently high sticker prices have started to take their toll on buyers’ enthusiasm. Cox Automotive predicts that demand will wane in the second half of the year, as the pool of eager buyers shrinks.

Cox’s 15 million guesstimate would still be a ways off from the pre-pandemic heights of 17 million. On the flip side, it’d also mark a million-plus improvement compared to 2022, when Americans registered 13.9 million new cars.

Some analysts say this trend is only temporary; eventually, once the people who have been waiting for a chance to buy something for a year or more are satisfied, today’s high prices will turn away anyone on the fence, leading to a fall in demand. Others believe increased production will lead to oversupply come the end of 2023, prompting a rush of incentives as dealers rush to move cars off lots as quickly as possible. Those are nice thoughts, but in this post-pandemic world, anyone setting the price of anything has pretty much been able to have their cake and eat it too.

2nd Gear: Kia

We now turn from the macro view of the market to our case study of Kia, still the industry’s darling. Kia’s second-quarter sales rose 15 percent versus 2022 on the back of increased supply of crossovers like the Seltos, along with the Carnival minivan. Courtesy Automotive News:

June sales rose 8 percent to 70,495 and marked Kia’s 11th consecutive month of gains and the seventh time Kia has posted more than 70,000 sales in a single month.

Kia also set a first-half record, with sales of 394,333, up 18 percent compared with 2022.

Eric Watson, Kia America’s sales chief, told Automotive News that compared with the first six months of 2021, a notably strong period for the industry as consumers flocked back to showrooms following the pandemic, Kia’s first-half results were up 5 percent.

Watson attributed Kia’s record first-half results to the strength of its crossover lineup, which logged an increase of 26 percent in the first six months.

The only sore spot was the brand’s electric cars, which miss out on the new Inflation Reduction Act federal tax credits unless leased. EV6 sales lagged 32 percent in the second quarter. Pretty much every other nameplate in Kia’s repertoire saw a bump, though.

3rd Gear: Toyota Will Share

Toyota has shed more light on its EV transformation strategy, which basically amounts to “do everything.” Solid-state batteries, gigacasting, and a general reduction in the number of manufacturing steps is how the company expects to reach its goal of 3.5 million battery EVs sold annually starting in 2030. In fact, Toyota believes in its tech so much, it plans to spread the wealth across its slate of marques and pseudo-partners. From Auto News:

The carmaker helms an alliance of carmakers interwoven by cross-shareholdings. Under its umbrella is Subaru, Mazda, Suzuki and Daihatsu, as well as truck makers Hino and Isuzu.

Tally their global sales, and they form a formidable 16.3-million-unit Japanese juggernaut.

In the fiscal year ended March 31, for instance, Toyota – including Daihatsu and Hino – notched retail volume of 10.56 million vehicles worldwide. Subaru sold 852,000, Mazda moved 1.11 million. Suzuki chipped in another 3 million, and Isuzu rounded out the pack with 771,000 trucks.

Of course, we’ve already seen this strategy start to bear out with Subaru, which sells its own version of Toyota’s bZ4X electric crossover, called the Solterra. That hasn’t really put the brands’ EVs on the radar yet, but with better products, anything’s possible.

4th Gear: A Milestone For China’s Auto Sector

For the first time ever, the majority of cars sold in China this year will hail from domestic makes, based on analyst predictions. Courtesy Reuters:

For the past four decades, China’s auto market has been dominated by established global brands such as VW and Toyota operating in joint ventures with Chinese partners.

But competitive pricing, faster rollouts of new models and the rise of domestic electric carmakers like BYD, Nio and Xpeng Motors have changed the dynamic for made-in-China auto brands.

China passed Japan as the world’s largest auto exporter in the first quarter of this year.

AlixPartners forecast China’s overall auto sales would grow 3% this year to 24.9 million vehicles, recovering to the level of sales before COVID-19. It forecast growth to 30.6 million vehicles in 2030, when it projected more than half of vehicles sold in China would be EVs.

China’s government awarded about $57 billion in subsidies to domestic EV makers between 2016 and last year, the news agency reported. By contrast, the U.S. government has provided about $12 billion. In fact, the problem China’s auto sector now faces is one of overcapacity. There are simply too many local brands to survive even for that gargantuan market, which Xpeng vice president Brian Gu warned everyone a few months ago.

Reverse: A Vampire Makes History

On this day in 2000, 23 years ago, the jet-propelled Vampire car set the U.K.’s land speed record at the hands of Colin Fallows, at a speed of 300.3 mph — a record that still stands today. Of course, the car is also very well known for almost killing Richard Hammond in 2006. Hammond made amends with the Vampire early last year in a Drivetribe video; it’s great to see them on better terms now.

Neutral: Buying Cars

Have you put off a car purchase in the last few months or years, due to supply shortages or sky-high prices? What were you entertaining, and what’s holding you back?