Uncertainty Looms Over Light Vehicle Sales for the Rest of the Year

In the near future, it remains uncertain whether the supply of new vehicles or consumer affordability will have a greater impact on auto sales. However, despite these factors, demand for new light vehicles in the US is expected to continue its gradual increase in May. S&P Global Mobility predicts sales of 1.31 million units, a year-over-year increase of 18% and the 10th consecutive month of improvement. This translates to a sales pace of 14.5 million units, slightly lower than the previous month but in line with ongoing trends.

On the supply side, ongoing supply chain issues have led to consistently increasing retail inventory levels, which plateaued at around 2 million units heading into the summer months. This increase in inventory has given consumers more negotiating power, with 40% of vehicle listings now priced below MSRP compared to less than 25% a year ago. However, there are still certain models that remain hard to find.

While auto sales in May are expected to reflect the opposing market conditions of improving inventory and uncertain consumers, S&P Global Mobility’s analysis suggests that sales volumes over the next few months will remain steady. However, affordability challenges such as macroeconomic uncertainty, rising interest rates, and tighter credit conditions could limit consumer choice despite increased inventory and downward pricing pressure.

It is predicted that battery-electric vehicle (BEV) sales will continue to increase in 2023. It is estimated that BEV sales will rise by over 45% by April 2023, which is around 110,000 more than the same period in 2022. However, BEV sales may become more unstable in the coming months due to the implementation of US federal EV incentive eligibility on April 18, 2023, and ongoing price adjustments from Tesla. In May, BEV share is projected to be at 7.6%, which is expected to remain consistent. In addition to pricing developments, new and updated BEVs will continue to drive BEV sales throughout the year.