In the recent third quarter of 2023, new vehicle sales in the U.S. dropped by 5% year-over-year, totaling 3.88 million vehicles. This decline is indicative of ongoing struggles within the automotive industry, primarily linked to persistently high prices that have resulted from significant hikes during the pandemic-driven shortages. In contrast, the used vehicle market has seen a reduction in prices, which has led dealers to adopt aggressive pricing strategies to stimulate sales. Nonetheless, while used vehicle prices have diminished significantly, automakers continue to grapple with managing high prices for new vehicles. Stellantis, in particular, suffered a notable 20% decline in sales for the quarter, igniting a backlash among dealers who are overwhelmed with stagnant inventory. To combat this issue, there is a pressing need for substantial price reductions, compelling manufacturers to consider sacrificing their historically high profit margins to revive sales.
The automotive market has seen stagnation in new vehicle sales over the past 20 years, with prices consistently increasing and manufacturers shifting focus towards higher-end models to boost revenue. This premium pricing strategy has, however, backfired, stifling sales during both prosperous and challenging market conditions. As the third-quarter sales data paints a sobering picture, forecasts suggest that total sales might only see a modest rise overall compared to the previous year, mainly due to the uneven performance across various automakers. Legacy automotive brands like General Motors, Toyota, Ford, and Nissan have all experienced sales fluctuations, while newer market entrants like Tesla and Hyundai-Kia have been capturing a significant market share, reflecting a shift in consumer preferences.
In September, the average incentives per vehicle sold rose sharply by 63% year-over-year to $3,047, accounting for roughly 6.2% of the manufacturer’s suggested retail price (MSRP). Although leasing has driven part of the incentive spending, automakers are still hesitant to reduce their prices significantly, despite the visible rise in incentives compared to pre-pandemic levels. Manufacturers must navigate a fine balance between maintaining profit margins and stimulating demand through price cuts. Tesla and other electric vehicle (EV) manufacturers have already begun to lower prices, indicating potential market shifts in response to consumer demand for affordability.
General Motors continues to dominate as the leading automaker in Q3 but faced a slight decline of 2.2% in overall sales. The company did, however, witness a significant surge in EV sales, which jumped 60% year-over-year despite challenges in ramping up production. Following GM’s decision to phase out the Bolt EV models, the company has been introducing new EV models, yet scaling production remains a hurdle due to supply chain issues. On the other hand, Toyota’s sales were down by 8%. The company has only recently shifted its stance on EVs and is struggling with production commitments despite having announced ambitions to produce a million EVs annually by 2026, a target that now appears increasingly ambitious given current supply chain constraints.
Ford’s performance was relatively stable, with a marginal increase of 0.7%, aided by a 12.2% rise in EV sales. The automaker is reevaluating its strategies in light of competitive pricing from Tesla and aims to focus on accessible EVs as opposed to high-priced offerings. Meanwhile, Hyundai-Kia reported a 5.5% year-over-year rise in sales, propelled by its strategic decision to shift EV production to the U.S. to qualify for federal tax rebates. Honda recorded an impressive 8% increase, buoyed by its entry into the EV market with the launch of its Prologue model. Stellantis, however, suffered significantly due to a 20% sales plunge, leading to a critical situation with growing unsold inventory and dealer dissatisfaction, indicating the need for substantial changes to its pricing and sales strategies.
Nissan experienced a slight decline of 2.2% overall, although it did see a notable increase in its EV sales by 65.7%. This divergence highlights the shifting landscape in the automotive market, where traditional internal combustion engine (ICE) vehicles are facing declining demand in favor of newer electric models. Tesla’s global sales also showed a modest increase of 4.3% for Q3, marking a successful quarter, although it remains behind its stronger Q1 and Q4 performance timelines. Overall, the third-quarter results underscore the ongoing complexities and competitive dynamics within the automotive sector, emphasizing the necessity for automakers to adapt pricing strategies and focus on consumer-centric offerings to remain viable in an ever-evolving market.