CAMIO
2024 Cox Automotive Market Insights and Outlook
Friday March 29, 2024
Reliable data and smart insights are crucial for navigating the ever-changing market conditions of the dynamic auto industry. Fueled by the largest breadth of first-party data fed by 2.3 billion online interactions a year, the Cox Automotive Economic and Industry Insights team collects, analyzes and shares the best information possible.
The 2024 CAMIO
The Cox Automotive Market Insights and Outlook (CAMIO) report provides the key takeaways from the 2023 data and what’s next in 2024. Additional content in the 2024 CAMIO includes the latest Car Buyer Journey Study, the quarterly Cox Automotive Dealer Sentiment Index reports and the quarterly Kelley Blue Book electric vehicle sales reports.
A Look Back
In many ways, 2023 was a transitional year that saw most key metrics used to measure the business begin to drift back into normal patterns. Even inflation retreated, falling from over 6% in January 2023 to 3.4% at year’s end, still above the Fed’s target, but vastly improved. In the auto market, inventory, transaction prices and sales all improved – even vehicle affordability recovered, despite auto loan rates near record highs.
The story could have been very different. In fighting inflation, the Fed pushed the federal funds rate higher four additional times in the first half of 2023 – after seven increases in 2022 – before finally hitting pause at the July 2023 meeting. Interest rates were a drag on last year’s economy, but the consumer hung in there, buoyed by a healthy labor market and increasing wages. Auto loan rates hit 20-year highs in 2023, but downward price pressure helped keep sales rolling. With new-vehicle inventory improving month after month, sales followed, and the market finished with its highest volume since 2019. Further improvements are expected in 2024.
The UAW strike in the fall of 2023, which lasted 46 days and was particularly contentious, might have driven an improving market right into the ditch but ultimately did not have a large impact on total vehicle sales. The Detroit automakers – all were impacted – took a hit in Q4 earnings, but the work stoppages were narrowly targeted and did not materially impact total industry volume. The full story of the UAW’s 2023 strike is still being written, as the union won higher wages not only for its rank-and-file members. Most all hourly autoworkers in the U.S. saw an increase, as non-union factories worked to match the union pay raises in hopes of maintaining workers. The higher wages are now part of a larger story of margin compression challenging the industry.
As 2023 came to a close, auto dealers in the U.S. dealers were feeling the pressure of stagnant new-vehicle prices, higher incentives and tighter margins. The used-vehicle market, often a dealer’s moneymaker, was struggling as well, held down by relatively tight inventory, high prices and high loan rates. When asked, high interest rates were noted as the No. 1 factor holding back business in Q4 2023. Dealer profits had tumbled from all-time highs in 2021 and 2022 and the market was beginning to look and feel a bit more familiar: Slow growth and slim margins. As 2023 drifted into 2024, all eyes were on Jerome Powell’s Federal Reserve. Rate cuts are expected, but the question is when.
What’s Next
The word that will likely sum up the U.S. auto market in 2024 is “normalcy,” according to Cox Automotive’s Forecast: 2024. Powered by the best data and keenest insights, Cox Automotive developed five themes that offer a collective vision and valuable perspective on the road ahead for the U.S. auto industry. Running throughout the five themes is a welcome return to normalcy after four years of everything but normal, with nothing in the data suggesting surges in any direction, as the industry witnessed in 2021 and 2022.
The team is calling for slow growth in the year ahead. The auto industry is shifting from a seller’s market to a buyer’s market, tilting the field to begin favoring consumers again. And the auto business is expected to continue being influenced heavily by high loan rates. Some relief is expected in 2024, but how much and how soon will be a key driver of the market this year. (Oh, and did we mention the election in November? Stay tuned!)
“A decade from now, when we look back at the years immediately following the global pandemic of 2020, we’ll be awed by the dramatic swings and unprecedented circumstances the economy and auto market endured.”
– Cox Automotive Chief Economist Jonathan Smoke
A Market Driven by High Rates
2023 ended with the Fed remaining patient and leaving interest rates and overall monetary policy unchanged. High interest rates limited those who could buy vehicles that require financing.
Cox Automotive/Moody’s Analytics Vehicle Affordability Index
New-vehicle sales were stronger and more consistent than expected in 2023, supported by growing deliveries, improving supply levels and higher incentives.
New-Vehicle Inventory Volume & Days’ Supply
New-Vehicle Average Transaction Prices
Used-vehicle sales were curtailed in 2023 by a constrained supply of ‘nearly new’ used vehicles entering the market and improving new-vehicle inventory, which pulled some would-be buyers out of the used-vehicle market.
The Manheim Used Vehicle Value Index (MUVVI) declined further in 2023, and the seasonal patterns were a bit more normal but not without volatility.
Xtime service metrics continued moving in different directions in 2023, with service department revenue at U.S. franchised dealerships steadily increasing while service ticket volume declined.
Additional Content
Cox Automotive’s Car Buyer Journey Study
The annual Car Buyer Journey study from Cox Automotive examines several attributes related to vehicle buying in America and focuses specifically on new- and used-vehicle buyer satisfaction.
Cox Automotive Dealer Sentiment Index
Derived from a quarterly survey that Cox Automotive issues to a representative sample of franchised and independent auto dealers from around the country, the Dealer Sentiment Index measures dealer perceptions on the automotive market, from sales and inventory to profit and pricing. Importantly, the Cox Automotive Dealer Sentiment Index provides perspective on the key factors holding back business.
Kelley Blue Book Electric Vehicle Sales Reports
This quarterly report from Kelley Blue Book provides estimated sales of electric vehicles with a summary by brand and model.
The 2024 Cox Automotive Market Insights and Outlook (CAMIO) is one of the many tools we provide. We encourage you to regularly check the Cox Automotive Newsroom and the Auto Market Snapshot. Sign up for From the Newsroom, our biweekly newsletter, to receive the most comprehensive, timely data and insights possible, brought to you by the best team of analysts and experts in the industry.