Auto industry executives and analysts expect global car production to continue to be restricted this year and next, and car prices to remain high.
Auto industry executives at the New York International Auto Show this week are pessimistic about the outlook for supply. They point out that while car prices are falling from record levels, they are still above normal and that this is not expected to change in the short term because of falling car inventories, strong consumer demand and falling factory output.
Global car production declines
In March, S & P Global Mobile cut its global passenger car production forecasts for 2022 and 2023 by 2.6 million, to 81.6 million this year and 88.5 million next year.
Mark Fulthorpe, executive director of global production forecasts for S & P Global Mobile, said: "the downside risks are huge. In the worst case, global annual production will be 4 million vehicles lower than the previous forecast."
The conflict between Russia and Ukraine has led to logistics and supply chain problems, as well as a shortage of key vehicle parts. These problems are adding to an already tight supply chain due to the epidemic and the continuing shortage of semiconductor chips.
Even if the chip shortages and other supply chain problems that have plagued car assembly plants since early 2021 ease this year, strong consumer demand is likely to keep car inventories near historic lows, according to industry executives and analysts.
Since the beginning of this year, many automakers have been optimistic that the chip shortage will gradually ease, but the outbreak of the conflict between Russia and Ukraine and the resurgence of the COVID-19 epidemic continue to restrict car production around the world and cause other chaos.
Car prices remain high
The surge in car prices over the past year is also a clear sign that US consumers are facing broader inflationary pressures. Us inflation soared to 8.5 per cent in March, a 40-year high, driven by rising energy and food prices, tight supply and strong consumer demand, according to the labour department.
At the New York International Auto Show, concerns about inflation became the topic of discussion. Compared with previous years, media coverage of the auto show is relatively low-key, as fewer car companies attend the auto show and fewer high-profile model launches.
After soaring to record highs, American spending on new cars has shown some signs of leveling off in recent months. The average transaction price in March fell slightly to about $43700 for the third month in a row, according to J.D. Power.
Still, the research company reports that this is still about 26% higher than before COVID-19 's outbreak, when the average transaction price was $34600 at the end of 2019. The price of used cars has also fallen in recent months, but is still near all-time highs.
Auto industry executives and dealers say demand for new cars remains strong, despite rising interest rates and gasoline prices. Car companies expect there will be no shortage of buyers for all their cars, at least in 2022. "there is still a lot of pent-up demand," said Michael Colleran, Nissan's head of U. S. sales and marketing. "
At 10 dealerships in Utah, Arizona and Nevada, most cars are sold out ahead of time, according to dealer Chris Hemmersmeier. But he worries that rising interest rates or falling prices for used cars could eventually lead to lower prices for new cars and hurt sales.
In recent months, some car companies have raised their prices. Pieter Nota, BMW's global sales director, said BMW recently raised car prices in response to inflationary pressures across the business. So far, he says, this has not unnerved buyers. "consumers are digesting this and we see no sign of demand cooling."
Bob Carter, Toyota's head of North American sales, said: "this is a difficult time to buy a car, but it is a great time for the entire auto industry."