(Bloomberg) — Toyota Motor Corp. and Korea’s Hyundai brand both reported strong US new vehicle sales in the fourth quarter despite near-record sticker prices and high interest rates that made monthly payments a headache for buyers.
The Japanese automaker said Wednesday that deliveries rose more than 15% in the last three months of 2023, powered by growth from hybrid-electric vehicles. Hyundai sales gained 5% in the period, marking a record, it said.
Vehicle demand proved resilient late in the year for the two Asian brands, even with financing rates as high as 10% and waning pandemic-era pent-up demand that had propped up sales earlier in the year. Car buyers are still showing a willingness to pay an average of $48,000 for new vehicles, a trend that reflects the purchasing power of more affluent Americans.
“We’ve seen a big reduction in median- and lower-income households” buying new cars, which now “almost exclusively go to the top 20% of income households,” Jonathan Smoke, chief economist for researcher Cox Automotive, said in an interview.
Overall new vehicle sales likely slipped to a seasonally adjusted annual rate of about 15.4 million vehicles in the final month of 2023, down from about 15.5 million in the prior two quarters, according to estimates compiled by Bloomberg.
Toyota’s big gains came from its compact Corolla hybrid sedan, which more than doubled, and RAV4 small SUV, which rose 37% in the fourth quarter.
For Hyundai Motor Co.’s eponymous brand, it was a gas guzzler and an electric vehicle that grew the most in sales, with deliveries of the large Palisade SUV and Ioniq 5 EV nearly doubling in the quarter.
While 2023 was a big improvement over an inventory-constrained 2022, the challenges seen at the end of the year are expected to persist. Cox Automotive predicts US auto sales will be up less than 2% in 2024. That means the figure is unlikely to top 17 million anytime soon, as they did for five consecutive years prior to the pandemic.
“The new norm for the industry because of reduced affordability is closer to 16 million,” Smoke said. “We’ve lost about 10% of the buying pool.”
Automakers aren’t motivated to cut prices because they’re making more money selling fewer cars. Consumer spending on new vehicles reached a record $578 billion in 2023, its third consecutive year exceeding a half-trillion dollars, according to researcher J.D. Power. Consumers’ average monthly car payment in December was estimated to be $739, up $9 from a year earlier, J.D. Power said.
“Unless the industry finds a way to get back to more-affordable price points, we will see products that cater to higher income, higher credit-quality consumers,” Smoke said. “And that ultimately limits sales volumes.”
(Updates from first paragraph with Toyota, Hyundai sales.)