Automakers have screwed up the market for decades with price hikes and high-price hikes. Now they are paying the price with dismal volume.
By Wolf Richter for WOLF STREET.
The total number of new vehicles delivered to private customers and fleets (primarily rental fleets) in the U.S. rose 12.4% to 15.46 million vehicles compared to the dismal prior-year level.
The two best years were 2000 and 2016 with 17.4 million and 17.5 million vehicles sold, respectively. In 2023, sales were approximately 11% below the 2000 peak and 11.6% below the 2016 peak. And compared to 1986, sales decreased by 3.7%, and compared to 1985, sales were flat. That was almost four decades ago! During the same period, the US population grew by 40%!
Screwing up the market by raising prices and upscaling.
It turns out that after decades of raising prices and upgrading to maximize sales and profits in the U.S., automakers have created a market where the average American can no longer afford a new vehicle, and they are buying used vehicles – financially speaking good strategy.
The automakers have corrupted the US market to such an extent that new car sales stagnate in the best years and decline in the bad years.
Full-size pickup trucks are a good example of price increases and vehicle upgrading. There were only four automakers that sold large quantities of full-size pickup trucks in the United States: GM, Ford, Stellantis and Toyota. Nissan will discontinue its Titan in 2024 due to low sales. With Rivian and Tesla, two new players are now entering the market, still in small numbers.
So there are currently four companies selling large trucks in large quantities, with huge price increases year after year and grotesque profit margins, evidence of oligopolistic pricing behavior.
We here at WOLF STREET have developed our own new vehicle price index based on the best-selling truck, the Ford F-150, and the best-selling car, the Toyota Camry. We discussed this and our idea of pickup truck oligopoly here. And for your entertainment, here's the graphic – since 1990, the F-150 XLT's MSRP has increased 267%, including a 39.4% increase from 2020:
The average transaction price According to data from JD Power, the price including all incentives, rebates and additional stickers had increased by 36% during the pandemic, from $34,900 in December 2019 to an absurd $47,300 in December 2022.
Then, in 2023, dealer inventory became available again, discounts and incentives piled up, and most of the hideous addendum stickers disappeared (if you see an addendum sticker, just say “no”), and December 2023 was the average transaction The price was down 2.7% to a still absurd $46,055:
The largest automakers in the USA.
General Motors, No. 1: Sales of all its brands in the U.S. increased 14.1% to 2.59 million vehicles in 2023. However, this was a 16% decline from its recent peak in 2015.
Sales of GM's legacy Bolt and Bolt EUV electric vehicles rose 62.8% to 62,045 vehicles in 2023. After GM's price cuts and after the federal tax credit, a basic Bolt could be purchased for just over $20,000. And in this price range there is a demand for good vehicles. But 2023 was their swansong, GM killed them at the end of the year.
GM is currently rolling out several more electric car models based on its new Ultium platform, but sales have just begun and are tiny.
GM's sales had declined in each of the four years before the pandemic. Then the semiconductor shortage wiped out inventory. But in 2023, inventories returned to normal. You can sort of draw a mental line from 2015 to 2019 and then extend that line and you end up just above 2023, which creates an ugly trend.
Toyota, #2: Sales of the Toyota and Lexus brands combined in the U.S. increased 6.6% to 2.25 million vehicles in 2023. However, this was a 10% decline from the recent peak in 2015.
Toyota has no electric vehicle to speak of. A year ago, some lights went on and Toyota's long-time anti-electric vehicle boss Akio Toyoda was ousted and replaced by a new man, Lexus boss Koji Sato, under whom Toyota is now trying to develop an electric vehicle strategy.
The trend in this chart – the line from 2015 to 2019 and extended to 2023 – looks just as ugly as GM's:
Ford, No. 3: Sales of the Ford and Lincoln brands combined rose 7.1% to 1.996 million vehicles (OK, 2.0 million) in 2023, after seven straight years of declines. Sales are down 23% from the most recent peak in 2015.
Electric vehicle sales rose 17.9% to 72,608. This includes a 54.7% increase in sales of the F-150 Lightning to 24,165 trucks. The small start-up Rivian has thus surpassed Ford's electric truck sales. That's how good Ford is at selling electric vehicles as the company is currently busy countering an anti-electric vehicle revolt by its dealers.
Interestingly, sales of internal combustion engine and hybrid vehicles fell 0.4% year-over-year in the fourth quarter, while electric vehicle sales increased 27.5%. The increase in electric vehicle sales led total sales to rise 0.8% year-over-year in the fourth quarter. Excluding electric vehicles, total sales would have declined 0.3% year-over-year.
Ugly, ugly, ugly. I'm not even sure where to draw the mental trend line. But hey, Ford is wasting billions of dollars on stock buybacks:
Hyundai Kia, #4. Hyundai is the parent company of Kia, with Hyundai holding a 33.9% stake in Kia and Kia holding shares in Hyundai subsidiaries, and they share vehicle platforms. So for our purposes, we'll look at the duo as a car manufacturer with different brands.
And they rock and roll. In 2023 they surpassed FCA US (Stellantis) in sales for the first time. Year-on-year sales rose 11.7% to a new record of 1.58 million vehicles (Hyundai 801,195 and Kia 782,451).
Electric vehicle sales: Hyundai's Ioniq electric vehicle sales rose 76% to 46,917 vehicles. It also sells an electric version of its Kona crossover, but doesn't separate sales of the electric version (all Kona sales totaled 79,116). Kia's electric vehicle sales fell 2% to 19,997 vehicles.
Stellantis #5: Oh dear, FCA's U.S. sales fell another 1.3% in 2023 to 1.53 million vehicles. Since the most recent peak in 2015, sales have fallen 33%. FCA US was overtaken by Hyundai-Kia for the first time, having been overtaken by Toyota years ago.
It's not about the mass production of battery electric vehicles, but about the mass announcement about it. The first electric models should come onto the market by the end of 2024, it was said.
As far as ugliness goes, the trend in this chart is a category of its own and speaks of an existential crisis:
The three big US automakers? GM, Ford and Stellantis are the three major US automakers, or what's left of them. Toyota is number 2 in the US and makes vehicles in the US, but it is a Japanese company, so it is a foreign automaker. Hyundai-Kia is No. 4 in the US, but it's a foreign duo even though they make cars in the US. Stellantis is a European company that bought FCA US, but for some reason we still consider FCA US a US automaker, even though FCA US imports a lot of vehicles. So the boundaries are blurring.
We now have a fourth U.S. automaker that isn't yet as big in terms of U.S. sales but has been growing rapidly: Tesla. All vehicles sold in the USA are made in the USA – unlike other US automakers. So now we need to talk about the “big four U.S. automakers.” Or the big three, with Tesla in and the foreign car manufacturer Stellantis out?
Tesla does not announce US sales. Only worldwide sales are shown. But there is the registration data. According to registrations, the Model Y is the best-selling vehicle in the U.S. behind the F-Series truck. But registration data lags behind. And we only have them until the third quarter of 2023.
Tesla's global deliveries rose 11% quarter-over-quarter in the fourth quarter and 20% year-over-year. For the year as a whole they rose by 38%. We can estimate Q4 registrations in the US based on modest growth over Q3 and that's what we did here, not very accurately but close enough?
For the first three quarters of 2023, registrations increased to 498,000 (registration data via goodcarbadcar.net). Including a fourth quarter estimate, enrollment is more or less likely to have increased to around 680,000. So that's far smaller than the other US automakers. It is less than half of Stellantis' collapsed sales.
But Tesla's sales are heading in the right direction after rising from virtually nothing a few years ago. And so here I am including them for the first time in this annual discussion. Tesla has arrived.
Honda (American Honda Motor Co.) sales rose 33% from a 2022 slump when the company ran out of inventory due to semiconductor shortages. Compared to the 2017 peak, sales are still down 20%.
Like Toyota, it has completely given up on electric vehicles. And for 2024, instead of developing its own electric vehicle from the ground up, the company will offer an electric vehicle (Prologue) based on GM's new Ultium platform that will soon be available at a dealer near you.
Nissan: Sales of the Nissan and Infiniti brands combined rose 23% to 898,796, but were still 44% below the peak in 2017. An existential crisis is brewing. Ugly, ugly, ugly:
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