After seeing swings in pricing, a cratering of supply and a spike in interest rates, a levelling out is expected, according to Cox Automotive.
“The past four years have been chaotic, even by auto industry standards, and have shifted many normal seasonal patterns out of whack, which adds to the difficulty of forecasting what comes next,” observed Cox Automotive chief economist Jonathan Smoke.
The group broke down the year ahead into three themes. First was slow economic growth, but no recession. Consumer spending will be limited as interest rates remain elevated to cool inflation. Still, the expectation is for interest rates to come down, though not significantly. Still, the drop will help improve vehicle affordability.
“Overall, the economy in 2024 may not be very exciting, but that is much better than the instability of a recession,” Cox’s report said.
Secondly, expect downward pressure on pricing as supply increases to pre-pandemic levels. This increase will lead to more discounts and incentives — though it won’t reach 2019 levels that saw discounting exceed 10 per cent of transaction prices.
“Market forces will likely exert downward pressure on vehicle prices, further improving consumer affordability,” Cox added.
And so comes the third theme: Saying goodbye to the seller’s market.
“Heading into 2024, dealers are less optimistic about the future due to interest rates and weaker profits,” Cox noted.
The report observed that new vehicle dealers will be challenged by increased manufacturer’s suggested retail prices and invoice prices due to material and labour costs and a further shift to pricier models. They’ll also face downward pressure on transaction prices. Profits will also take a hit from needing to invest in infrastructure to support the growing sales of electric vehicles.
That leads to the fourth theme of EVs and 2024 being the year of more — more models, more incentives, more sales muscle and more discounting.
“The Cox Automotive team expects that the automobile industry will fully acknowledge the need to convince average consumers of the benefits of electric vehicles,” the group said. “They also believe that many consumers may not easily be convinced.”
It believes 2024 will see sales eclipse 2023’s number of one million EVs sold in the country. “Furthermore, electric vehicles, plug-in hybrids, and hybrids combined are likely to account for almost 24% of the market, with electric vehicles alone accounting for more than 10% of total sales,” Cox said.
Finally, Cox believes this year will be the best year for consumers to buy vehicles since the pandemic.
“Our research suggests that Americans are putting more emphasis on buying/owning personal transportation, in contrast to 2018, when consumers put a higher value on ‘access to transportation,” it said. “After tumbling in 2021 and 2022, satisfaction with the car buying process is expected to improve in the year ahead, thanks in part to better inventory and the return of discounting, but also from improved processes at the dealership that save time and make car buying more efficient.”