When Cox Automotive presents its 2024 forecast next week, expect to hear the word “normalcy” as the watchword for the year ahead.
Cox chose five themes for their 2024 outlook, and they all revolve around “a welcome return to normalcy after four years of everything but normal,” according to a press statement. Specifically, analysts don’t expect “surges in any direction” as the industry experienced in 2021 and 2022.
“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,” Jonathan Smoke, Cox Automotive chief economist, says in a statement. “To name a few, we saw historic appreciation in vehicle values, unimagined drops in supply and interest rates moving from all-time lows to 23-year highs at an unforgiving pace. The past four years have been chaotic, even by auto industry standards, and have shifted many normal seasonal patterns out of whack, which adds to the difficulty of forecasting what comes next.”
Here are the five key themes Cox expects in this new year:
1. Slow Growth Ahead
Cox Automotive expects the 2024 economy to experience weak growth but will not fall into a recession. High interest rates and declining inflation will likely continue, limiting consumer spending. Cox also predicts loan rates will remain high but may dip slightly, improving affordability and sales.
2. Vehicle Supply Is Back, Favoring Consumers, Placing Downward Pressure on Prices
Watch for new-vehicle inventory to rise along with incentives and discounting. Analysts expect new inventory to reach pre-pandemic norms in 2024, with almost 3 million units on the market, or three times the amount available during the chip shortage.
Still, Cox expects the used-vehicle market to grow by less than 1%. They also predict the total number of used vehicles sold will reach 36.2 million, with 19.2 million vehicles sold via retail channels, such as websites. Analysts expect certified pre-owned (CPO) sales to reach 2.7 million units, up 3% from 2023.
Operations at Manheim, the national auction arm of Cox Automotive, are expected to experience constrained growth in the wholesale market, with a volume increase of less than 1%. While analysts expect the volumes of repossessions, rentals and off-lease vehicles to increase in 2024 compared to the previous year, they are still likely to remain below pre-pandemic levels. As for price patterns, Cox anticipates a normalization trend. That means 2024 will be the first year in five with “relatively normal depreciation.”
3. The End of the Sellers’ Market
Expect affordability of new vehicles to remain an issue due to increased material and labor costs, reports Cox. Rising floor plan costs and investments in infrastructure support for electric vehicles will also cut into dealers’ profits. Margins for used vehicles and fixed operations are expected to remain relatively strong.
4. In 2024, the Electric-Vehicle Market Will Be “the Year of More”
Cox reports demand for electric vehicles is increasing, and dealers and manufacturers know that selling more EVs will require additional effort. The expectations for EV growth in the U.S. market have shifted from “rosy to reality” as sales increase, but customer acceptance of EVs isn’t keeping pace. Nevertheless, Cox Automotive expects 2024 to be “the Year of More” for EVs.
Cox expects EV sales in the U.S. will exceed the 1-million-unit record set in 2023. Furthermore, combined battery-electric vehicles, plug-in hybrids and hybrids are likely to account for almost 24% of the market, with BEVs alone accounting for more than 10% of total sales.
That’s in spite of the new Inflation Reduction Act guidelines that offer tax credits to fewer vehicles.
5. Car Buying in America Will Return to “Normal”
Cox expects the turbulence of the past few years to stabilize and consumers to have more options and better deals. They predict sales growth will be weak and constrained in 2024. That, Cox reports, “is a more normal state compared to the chaos of the past four years.”
