U.S. Light Vehicle Sales Forecasted to see a 1 Million Unit Increase for 2023

AutoPacific's annual forecast of U.S. light vehicle sales predicts 14.8 million units sold in 2023, increasing to 16.7 million units in 2026.

AutoPacific recently released its forecast of U.S. light vehicle sales, predicting 2023 will reach a year-end total of 14.8 million units sold. Up from a disappointing 13.8 million units sold in 2022, the 1-million-unit increase can be attributed to a few factors, including continued supply chain recovery, and electric vehicle (EV) growth. “Supply chain issues are continuing,” explains AutoPacific President and Chief Analyst Ed Kim, “but at the same time they are easing as well, presenting the main driver for increased sales in 2023.” AutoPacific predicts 5-year peak growth is reached in 2026 as sales level out as pent-up demand, originating from both pandemic-induced supply issues and the looming recession, is fulfilled.

Introduction of New, Inexpensive Mainstream EV Models Fuels Growth

EVs accounted for 5.6% of total U.S. light vehicle sales in 2022, up from 3.3% in 2021. Of those 2022 sales, 20% came from luxury brand EVs, a new high since EV sales began over a decade ago. Starting in 2023, AutoPacific predicts an increase in mainstream EV market share with the introduction and sales growth of new, inexpensive mainstream models like the Chevrolet Equinox EV and Tesla’s promised sub-$30,000 entry EV.

“These new, inexpensive mainstream models will help grow EV sales beyond the affluent early adopters of today to the mainstream consumers that will ultimately be critical for widespread adoption of EVs,” says Kim.

Economic Headwinds Remain Unknown

While vehicle sales growth is expected in 2023 and a few years beyond, all indications are that the United States continues to face the threat of a recession. AutoPacific expects this potential recession to be relatively mild; however, the severity and its impact on this year’s auto sales remains a wild card.

High Fuel Prices Likely to Impact Vehicle Type Before Powertrain

Since 2005, AutoPacific has conducted a bi-monthly online survey designed to measure the impact of fuel prices on consumers’ vehicle purchase decisions and driving behavior. The Fuel Price Impact Study (FPIS) puts years of trend data to work to understand how consumers react to fluctuating fuel prices and how the impact has changed over time.

Consumers are Often Reluctant to Change Vehicle Type

Historically, AutoPacific’s data have shown vehicle owners to be very tied to their current vehicle type. Whether a luxury brand owner or a mainstream brand owner, next vehicle intentions often mirror the current vehicle, or at least remain in the same macro category (car, truck, SUV, minivan).

“Lifestyle and family dynamics dictate vehicle segment, and for many, that means they’re locked into a specific vehicle type for 5-10 years,” says AutoPacific president and chief analyst, Ed Kim.

Independent of fuel prices, AutoPacific’s Future Attribute Demand Study (FADS) asks respondents what type of vehicle they intend to purchase next. While current luxury brand car owners are slightly more committed to their current segment, more than 70% of all current owners intend to stay within the same macro segment, with the exception of Mainstream Large SUV/XSUV 2-row owners, who may be more likely than other SUV/XSUV owners to migrate to a car or truck next time.

Whether a luxury brand owner or a mainstream brand owner, next vehicle intentions often mirror the current vehicle, or at least remain in the same macro category.

What happens when fuel price is added to the mix?

When asked about the impact of fuel prices on their next vehicle type and powertrain intentions in AutoPacific’s bi-monthly FPIS, only 24% of current luxury brand owners and 21% of current mainstream brand owners say higher fuel prices would change their next vehicle type. The catch? Fuel prices must increase approximately $1.25/gallon from where they are now for that to happen. Respondents are more likely to change powertrain type, but at a higher fuel price than for vehicle type. Current luxury brand owners say it would take a fuel price of $5.96 per gallon (median) for them to change powertrain type – a $1.86/gallon increase over the price they’re currently paying. Numbers are similar for current mainstream brand owners, who would change powertrains at a price $2.05/gallon higher than what they’re currently paying.

Respondents are more likely to change powertrain type, but at a higher fuel price than for vehicle type.

“Right now, a relative lack of alternative powertrain choices within vehicle segments means that it’s often easier for a consumer concerned with fuel economy to stick with a gasoline engine and migrate to a more efficient vehicle type,” says Kim. “The ease of transition and comfort level with a different powertrain technology remains a challenge for the auto industry that only time can rectify.”

Healthy SUV Growth Forecasted Despite High Fuel Prices

SUVs, large or small, are here to stay, despite rising fuel prices. AutoPacific recently asked over 300 current SUV owners how high fuel prices would affect their next vehicle purchase decision. The survey, issued bi-monthly to AutoPacific’s proprietary panel of respondents, is designed to gauge consumer reactions to fuel prices over time. Findings reveal that current high, or higher, fuel prices would cause the majority of current SUV owners (45%) to consider a hybrid or plug-in hybrid (PHEV) SUV or Crossover, while 27% would consider an EV SUV or Crossover, and 29% would be unaffected. “Most new traditional gasoline SUVs get much better fuel economy now than they did when fuel prices spiked in 2008 and caused a shift in the market,” says AutoPacific President and Chief Analyst, Ed Kim. “Couple that with an influx of hybrid, PHEV and EV SUV offerings and consumers have so many choices that they don’t have to downsize or change vehicle types.”

Current SUV owners would prefer to consider an alternative powertrain SUV or crossover than downsize or change vehicle types.

Alternative Powertrain SUV Market Share Growing at a Higher Rate than Overall SUV Market Share

According to AutoPacific’s annual forecast of U.S. light vehicle sales, SUVs will continue to dominate the market, reaching over 60% market share in 2027. Additionally, AutoPacific’s most recently issued forecast shows SUVs will make up over half of alternative powertrain market share in 2023 and beyond, and alternative powertrain SUVs will account for over a quarter of the total market by the end of 2027. “While SUVs continue to take over the new vehicle marketplace, alternative powertrain SUVs will continue to make up more of those SUV sales,” says Kim. In 2021, alternative powertrain SUVs made up 16.4% of total SUVs sold in the U.S. By 2027, AutoPacific expects they will make up 42.6% of all SUVs sold, giving SUV shoppers many options from which to choose.

Alternative powertrain SUV share of the overall market is growing at a faster rate than overall SUV market share.

Latest AutoPacific Forecast Shows a Gloomy 2022, But Share of Higher Priced Segments Grows

Due to continuing supply chain issues that remain a major impediment to industry sales recovery, AutoPacific is expecting an underwhelming 2022 with total U.S. light vehicle volumes at about 15.5 million units. Consumers can expect continued low inventories at dealerships and dealer markups resulting in higher transaction prices, and rising interest rates will have further negative impact on their purchasing power. “As transaction prices rise, people who are acquiring new vehicles during this time are likely to be more affluent, so market share of higher priced segments, such as Luxury SUVs and Pickups, is forecast to grow this year even as supply remains constrained,” says Kim.

Light Vehicle Sales Predicted to Increase to 16.2 Million Units in 2022

Automotive consulting firm AutoPacific’s recently released forecast of U.S. light vehicle sales predicts 2022 will reach a total of 16.2 million vehicles sold. This is up from the 15.1 million units actually sold in 2021 during the second year of the ongoing COVID-19 pandemic that continues to cause havoc on the global supply chain and results in drastically short supplies of new vehicles available to consumers

Moving forward into a new year, AutoPacific expects over a 1 million unit increase over 2021, as chip supply gradually returns and new vehicle inventory starts to fill up again, especially during the second half of 2022. “Consumers have money to spend on new vehicles,” says Ed Kim, AutoPacific President and Chief Analyst, “but with such low supply last year and the start of this year, there is pent-up demand.”

2023 will see a return to 17+ million unit volumes, followed by a mild cooling off period over the next couple of years as pent-up demand gets filled, though volumes are expected to stay above 17 million units.