The Automotive Outlook wrapped up with a Global Light Vehicle Outlook from Jeff Schuster of LMC Automotive. Schuster has been a staple in our events for many years and always provides critical information to our attendees.
Near-term economic outlook
Focusing on 2022, there has been some improvements, despite what it feels like. The outlook for 2023 is a bit darker. Schuster points to the Fed increasing interest rates and tightening the market, record-high inflation, and very low consumer sentiment as pressures on the US economy noting that Oxford Economics has forecasted a negative GDP growth for the US into 2023, signaling a mild recession. He also shed light on the global economy, mentioning several geopolitical issues that are creating a great deal of uncertainty for the global economy for years to come. In the forecast, China was the only market to have GDP growth and is really the only stabilizing factor on global GDP by the numbers.
Automotive market backdrop by region
Markets have shown a strong rebound following the initial lockdowns in Spring 2020 with an explosion in Summer 2020 as government incentives combined with pent-up demand. As we moved into 2021, we were met with more challenges, this time in the form of supply chain disruption, movement restrictions in some countries, and the Russia/Ukraine conflict. Moving into 2022 recovery has continued with China hitting all time high sales volumes as it reopens, although risks of further shutdowns and falling behind on production are still present.
Forecasts show no growth in global light vehicle sales from 2021 to 2022, although it may have dropped if it was not for the increase in volume from China, as there were contractions in most markets across the world. Schuster presented a balanced forecast with the downside risks pretty much matching the upside risks. Slight increases are predicted in 2023, and in 2024 we return to pre-pandemic levels, however there is a lot of time between now and 2024 that could impact these figures.
US light vehicle sales recovery trends
Depressed volumes in 2022 do not necessarily reflect a decline as much as a slowdown in recovery. We’ve primarily been battling supply issues but are now dealing with forces on the demand side, with affordability being the main concern. Transaction prices have reached an all time high that is a combination of number of available vehicles and the increased number of customers paying over sticker price. Discounting is almost nonexistent, showing a 50% decrease from last year due to limited supply. The value of trade-in vehicles are also much higher than we have seen in recent years.
Path to electrification influences mid-to-long-term outlooks
There has been a concerted effort in the push to electrification, so long-term forecasts show BEVs making up majority of total sales but the near-term is a bit more unclear. How will we get there?
A lot of the factors impacting the ICE market (affordability, availability, etc.) will still apply to BEVs in addition to infrastructure issues, limited range (and other range issues), home/life/work arrangements, restrictions and other issues will impact how quickly BEVs will become more mainstream.
Jeff Schuster covered the automotive market outlook in much more detail than we could ever hope to capture, you can watch his full session here.
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