US car sales to slow down in 2024
The year 2023 was highly successful for the US auto sector. At the time, the market saw high buyer activity levels, mainly due to the stabilisation of supply chains. In 2024, however, US car sales could slow down compared to the previous period.
According to Edmunds analyst Jessica Caldwell, we should not expect much momentum in auto sales this year. She cites the rise in interest rates as the main reason. According to forecasts, the country’s sales volume in 2024 will amount to 15.7 million units. In the previous period, it was 15.5 million cars. Analysts consider such growth insignificant compared to the dynamics of 2023 when sales for the year increased by 12%.
Along with the slowdown, the US market is experiencing unmet demand. Many potential buyers have postponed purchases for fear of economic instability. However, the credit sector is still precarious, putting pressure on people’s purchasing power.
Overview of the situation in the automotive sector
The effects of the pandemic have led to a shortage of key parts for the automotive industry, particularly electronic chips. At the same time, customer demand for new cars was relatively high. As a result, there was a severe supply shortage in the market. In 2023, the semiconductor shortage eased, and manufacturers returned to their usual production pace. However, in 2023, the Federal Reserve tightened monetary policy, leading to an increase in interest rates. Consumers’ outlays on car purchases increased significantly, affecting demand.
The traditional way to buy a new car in the US was with an interest-free loan. These terms had existed for many years, even as prices rose. However, almost all car manufacturers and banks stopped offering these loans after the interest rate hike. According to Edmunds, zero-interest financing accounted for just 2.3% of new car sales in the fourth quarter of 2023.
At this point, the cost of a car loan has reached record levels for the country:
– in Q4 2023, the average monthly payment was US$739;
– for the same period in 2022, the figure was US$717 per month.
Analysts do not yet see the conditions for reducing loan rates reflected in sales volumes.
The situation in the electric vehicle sector
More than 2 years ago, the US government approved a programme to develop the electric transport sector. The document provided for allocating funds to expand the charging station network for electric vehicles. However, the country has not yet created the necessary infrastructure to use electric cars conveniently. According to the adopted programme for the sector’s development, manufacturers were hoping for active growth in sales of electric cars in 2024 and 2025. However, experts now expect a more moderate dynamic. Sales of electric vehicles are likely to reach 1.5 million in 2024.
