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10

Predictions for 2023

Updated with new data from

 Q1

10 PREDICTIONS FOR 2023
|
1 2 3 4 5 6 7 8 9 10

The one that matters most

1

A SLOW-GROWING ECONOMY WILL PLACE PRESSURE ON THE AUTOMOTIVE MARKET

Real US GDP Growth and Forecast

0 %
Average 2014-2019
0 %
Average 2021
0 %
Average 2022
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A recession would result in a further GDP decline of

< 0 %
2023 Recession

A soft landing would result in GDP growth of

Arrow Up
< 0 %
2023 Soft Landing

WHAT IT MEANS FOR THE AUTOMOTIVE MARKET:

Recession or not, automotive market will be constrained
We expect the economy to see at least slow or very weak growth as the Federal Reserve tightens monetary conditions and consumers continue to wrestle with high interest rates. A job-wrecking recession is a worst-case scenario for the auto industry but hope for an economic soft landing remains. Either way, a sputtering economy will hold back the auto market in the year ahead.
READ MORE +
Source: United States Bureau of Economic Analysis, Moody’s Analytics, Cox Automotive Industry Insights

The one that car shoppers will love

2

NEW-VEHICLE INVENTORY LEVELS WILL CONTINUE TO INCREASE

Days of Supply (weekly)​

+ 0 %
New Car - 6@2x
prediction 2 graphic
Months@2x

WHAT TO EXPECT:

More Vehicle Options for Shoppers
While lingering supply chain and labor challenges will remain, and capacity will not return completely to pre-pandemic levels in the foreseeable future, stronger production levels and softer demand will lead to higher days’ supply and, ultimately, more vehicle options for shoppers in 2023.
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Source: vAuto, Cox Automotive Industry Insights

The one that's rising

3

TOTAL RETAIL VEHICLE SALES WILL INCREASE SLIGHTLY

Arrow Up

New
vehicle sales

increasing by 1.8% year over year to
0 M
New Car + Lights@2x
Arrow Up

Fleet
vehicle sales

remain
0 M
Fleet Car + Lights@2x
Arrow Up

Used
vehicle sales

increasing by 0.4% year over year to
0 M
Used Car + Lights@2x

WHERE ARE THE BRIGHT SPOTS?

New-vehicle sales will be up the most
With new-vehicle inventory levels improving, Cox Automotive forecasts a 3% year-over-year new-vehicle sales growth fueled by stronger-than-expected retail sales to start the year, an increase of 100,000 units. In the used market, the supply of nearly new vehicles will be particularly challenging in 2023, but with a strong start to the year, total used retail sales will likely be up 0.4% to 19.2 million units. CPO will fall to 2.4 million units as the drop in off-lease volume hurts the potential for market volumes.
READ MORE +
Source: Cox Automotive Industry Insights

The one that’s surging

4

SALES OF ELECTRIC VEHICLES IN THE U.S. WILL SURPASS 1 MILLION UNITS FOR THE FIRST TIME

Key barriers to consumer consideration are improving:

0 %
vs. 57% in 2021
Lack of charging
stations
0 %
vs. 42% in 2021
Battery not holding
charge
0 %
vs. 41% in 2021
Cost of battery
replacement

EV SURPASSES

1M UNITS

WHAT’S POWERING THE SURGE?

BEVs, new model launches and government-backed incentives
The battery electric vehicle (BEV) market continues to outpace the overall market in sales. There will be 27 new model launches or critical refreshes in 2023. So, with expanded product availability coming and a fresh round of government-backed incentives to motivate buyers, this year will be an important growth milestone for EVs.
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Source: 2022 Cox Automotive ACES

The one that won’t last

5

2023 WILL BE THE LAST YEAR USED-VEHICLE PRICES SEE ABOVE-NORMAL DEPRECIATION

Year over Year % Change Manheim Index, as of December 2022

Wholesale vehicle prices are down

0 %
year-over-year as vehicles have returned to being depreciating assets
New Car 8@2x
Arrow Down
0 %
0 %
0 %
0 %
0 %
0 %
Bars - Numbers@2x
Years@2x

HOW TO STAY UP TO DATE ON USED CAR PRICING

The Manheim Used Vehicle Value Index is published every month

Recognized by financial and economic analysts and journalists as the premier indicator of pricing trends in the used-vehicle market, the Manheim Used Vehicle Value Index (MUVVI) is published monthly, along with a mid-month check-in. With low supply, strong used-vehicle sales are forcing dealers to restock from a tight wholesale market. As a result, wholesale used-vehicle values rose to start the year with large year-over-year increases. We expect the Index to finish the year up 1.6% year over year in December 2023.

READ MORE +
Source: Manheim, Cox Automotive Industry Insights

The one pushing low income and credit challenged consumers away

6

VEHICLE AFFORDABILITY WILL BE THE BIGGEST CHALLENGE FACING VEHICLE BUYERS

Higher interest rates and prices pushed the average payment to a new record

0
weeks

Weeks of Income Needed to Purchase a New Light Vehicle

New Car - 6@2x
$ 0
Prediction 6 graphic@2x
Years@2x

WHAT DOES THIS MEAN FOR AUTOMAKERS?

More new models will be geared toward higher-income buyers
Elevated retail prices and high auto loan interest rates combine to produce record monthly payments in 2022, levels that increasingly pushed lower income and lower credit quality consumers out of the market. More of the same is expected in 2023, as the automakers increasingly cater to the new-vehicle market with more expensive products for higher-income consumers, leaving less-affluent and subprime buyers struggling to find affordable vehicle payments that satisfy monthly budgets.
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Source: Moody’s Analytics and Cox Automotive Industry Insights

The one we haven’t seen in a long time

7

ALL-CASH DEALS WILL INCREASE TO LEVELS NOT SEEN IN DECADES

0 %+
New Car 8@2x

of new-vehicle purchases likely

to be all-cash deals in 2023

WHAT ARE THE IMPLICATIONS FOR DEALERS?

Prolonged impact on profit pools, F&I profits, and future buying behaviors
With auto loan interest rates hitting 20-year highs, more wealthy consumers will buy with cash rather than finance in 2023, placing downward pressure on dealership F&I profits. Historically cash represented less than 15% of new retail vehicle sales transactions. For example, in 2019, the share was 13%. In 2022, the preliminary share estimate based on data through November is 17%, with the last 2 months averaging 20%. If the trend continues, 2023 will likely see a share of all-cash deals above 20%. This change will likely have lingering impacts on industry profit pools and future buying behaviors.
READ MORE +
Source: 2022 Predictions Dealer Study, Cox Automotive

The one that keeps climbing

8

SERVICE OPERATIONS VOLUME AND REVENUE WILL CLIMB FOR DEALERSHIPS

With retail sales expected to be flat or down,

fixed operations as a profit center

will be more important than ever in 2023.

Laptop Icon
Wheel Icon
Tool Icon
Gear Icon
New Car 8@2x

WHAT CAN DEALERS DO TO FURTHER BOOST FIXED OPS REVENUE?

Expand beyond servicing 5 year or newer vehicles
As affordability issues lead more owners to maintain current vehicles, 2023 should see continued strong dynamics in the service lanes, with or without a recession. Fixed operations saw strong revenue growth in 2022 as pricing power and high demand led to large increases in average ticket size despite total service volumes not yet recovering to 2019 levels. Since most dealer’s fixed ops marketplace are defined as less than 5-year-old vehicles, expanding it to slightly older cars and advertising it, will advance their growth. We track service activity and service revenue each month with two metrics that we publish on the Cox Automotive Newsroom — the Xtime Repair Order Revenue Index and Xtime Repair Order Volume Index —so you can keep a close eye on them throughout the year.
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Source: Xtime, Cox Automotive Industry Insights

The one you can’t ignore

9

HALF OF VEHICLE BUYERS WILL ENGAGE WITH DIGITAL RETAILING TOOLS

0 %
of shoppers
circle-car-ghraphics

are more likely to buy from a dealer who provides the ability to complete nearly all of the process online 

WOULD MOST BUYERS PREFER A 100% ONLINE PURCHASE EXPERIENCE?

No, most would prefer an omnichannel buying experience
The shift to eCommerce was accelerated by the pandemic and shows no sign of fading. In the year ahead, Cox Automotive forecasts that half of all vehicle buyers will engage with at least one digital tool during the purchase process. However, it’s important to note that fully digital vehicle purchases will continue to be only a small percentage of the business, as most buyers will pursue an omnichannel vehicle buying experience, where they complete some purchase steps online but still want to go into the dealership for at least part of the transaction.
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Source: 2022 Digitization of End-to-End Retail Study, Cox Automotive

The one that turns fleet buyers into EV buyers

10

FEDERAL INCENTIVES WILL ENCOURAGE MORE FLEET BUYERS TO CONSIDER ELECTRIFIED SOLUTIONS

0 %

year-over-year increase in
fleet buyers shopping for EVs

Fleet Car - Electric@2x

WHAT ELSE IS AUGMENTING THIS TREND? 

Investments in charging infrastructure  
A key element of the Inflation Reduction Act of 2022 was the reshaping of EV tax credits in the U.S. Within the new laws are incentives designed to entice fleet operators to consider electrified vehicles in the coming year. Fleets have historically shown slow adoption of EVs, but recent research indicates 66% of fleet buyers are considering EVs, up from 43% in 2021. And fleet adoption of EVs is growing rapidly, with a 31% increase in fleet adopters year over year. New incentives and investments in charging infrastructure will likely amplify this trend.
READ MORE +
Source: Escalent Fleet Hub
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