Despite a strike affecting major automakers like General Motors, Ford, and Stellantis, as well as the challenges posed by high prices and rising interest rates, the US new car sales market experienced significant growth in the third quarter.
General Motors (GM) reported an impressive 21% surge in sales compared to the previous year’s quarter. This uptick can be attributed, in part, to an improved supply of vehicles compared to the previous year when a shortage of crucial components, notably computer chips, had constrained the availability of new vehicles, leading to record-high prices.
Despite the strike at GM, the company reported its largest inventory of new vehicles at dealerships since 2020, the year the pandemic began.
On the other hand, Stellantis, which operates brands like Jeep, Ram, Dodge, and Chrysler, saw a marginal 1% decline in sales, which was only slightly below the predicted 1% increase in sales. Analysts suggest that Stellantis’ pricing strategies, featuring more expensive options, might be a contributing factor to the slightly lower sales figures.
Ford, whose sales figures were not available at the time of this report, is expected to report an approximately 8% increase in sales according to industry experts.
Electric car manufacturer Tesla, which doesn’t break down its sales by country, experienced a 7% drop in global sales for the third quarter compared to the second quarter, but it still achieved a 27% increase compared to the same period last year.
Overall, the automotive industry witnessed strong sales gains, with Toyota, the second-largest US automaker, reporting a 12% increase in combined US sales for its Toyota and Lexus brands, slightly surpassing predictions. Edmunds anticipates an industry-wide increase of 16% in US sales.
Despite a strike initiated by the United Auto Workers union at the three major unionized automakers in mid-September, the impact on sales remained limited initially, as the strike initially affected only one assembly plant per company. Production of top-selling vehicles was unaffected, and even for vehicles where production ceased at the onset of the strike, such as the Jeep Wrangler and Ford Bronco, there were still sufficient inventories at dealerships and in transit from factories to dealers.
However, the UAW has been expanding the list of plants affected by the strike, which could have a more significant impact if the strike continues without substantial progress in negotiations.
Rising interest rates are another potential factor that could slow down sales across all automakers, as they result in higher average car payments, reaching record levels. New car purchase interest rates have risen by 3 percentage points since the previous quarter, reaching 7.4%, while used car loan rates have increased by 2 percentage points to 11.2%. These rates represent the highest average interest rates for both new and used car loans since the Great Recession and the financial crisis of 2007.
The average monthly car payment for new cars now stands at $736, a slight increase from $733 in the second quarter. Notably, a record 17.5% of new car buyers in the quarter had monthly car payments exceeding $1,000.
It’s important to note that the spike in interest rates remains a significant obstacle to affordability in both the new and used car markets, with expectations that rates will remain high or even rise slightly by the end of the year, despite the Federal Reserve’s decision to hold off on raising the federal funds rate in its recent session.
