Key facts
- U.S. automakers anticipate stable second-quarter vehicle sales despite economic headwinds.
- Sales are projected to remain flat year-over-year at 4.16 million vehicles.
- Affluent consumers, a growing segment of buyers, are less affected by inflation and fuel costs.
- A shift towards hybrid models is being driven by high gasoline prices.
- Interest rates on new-vehicle loans have decreased, and loan terms are being extended.
Automakers are poised to report steady second-quarter U.S. vehicle sales, a resilient performance despite significant economic pressures including elevated gas prices, rising inflation, and job market jitters. Research firm Cox Automotive anticipates sales to remain flat year-over-year, reaching 4.16 million vehicles.
Several factors are credited with stabilizing the market. A growing proportion of sales are to affluent buyers who are less sensitive to economic fluctuations. Additionally, a slight decrease in borrowing costs and a notable consumer shift towards hybrid models, driven by high fuel prices, are bolstering sales volumes. Charlie Chesbrough, senior economist at Cox Automotive, noted that the new-vehicle market appears to be unaffected by geopolitical events like the Iran war and the surge in oil prices.
Historically, the automotive market has contracted during periods of war and energy shocks. However, the current situation reflects a K-shaped economy, where higher-income consumers continue to make significant purchases while lower-income individuals face challenges. Data from S&P Global Mobility shows that buyers with household incomes of $100,000 or less constituted 36% of new vehicle sales last year, a decrease from 51% in 2020.
Consumers have found some relief through slightly lower interest rates on new-vehicle loans, which fell to 6.66% in June, the lowest in four years, according to JD Power. Many buyers are also extending loan terms to manage monthly payments, with 20% opting for 84-month loans in the first quarter. This has led to monthly vehicle payments as a percentage of disposable income declining to 13.3% in the first quarter, as per a report from AlixPartners.
The surge in gasoline prices has not yet triggered a widespread adoption of electric vehicles, but it has significantly increased interest in hybrid options. Cox Automotive data indicates that 56% of shoppers are more likely to consider a hybrid due to rising gas prices. Through May, U.S. hybrid sales saw a 17% increase, according to Motor Intelligence. This trend has particularly benefited Toyota Motor, the leading seller of hybrid vehicles, potentially positioning it to surpass General Motors in U.S. sales this year.