Automotive Trends Entering 2024: How Your Business Might Be Affected
After facing so much market disruption since the start of the 2020 pandemic, you can’t fault dealerships and other auto businesses for dreaming of stability.
As we reach the end of 2023 and start planning for 2024, though, those dreams will have to be put on hold. Economic factors, persistent inflation and an ongoing auto workers’ strike are causing change and uncertainty for both dealers and buyers, creating a swirl of new challenges and market dynamics to consider in your 2024 strategy.
But new challenges bring new opportunities—especially for auto businesses that are proactive in adapting to new marketing conditions. In a recent webinar with Jonathan Smoke, Chief Economist at Cox Automotive, we dug into these market changes and his industry predictions heading into 2024.
Some of the highlights from our conversation are below. Want a deeper dive into these automotive trends? Check out our full webinar.
Overall, 2023 has been a decent year for the automotive industry. New car inventories improved, used car prices normalized, and consumers have been comfortable making new purchases. In September, automotive spending was up 13 percent year-over-year.
Despite this momentum, Smoke and other experts believe that Q4 is headed for a slowdown—perhaps a significant one, given the different market forces contributing to this decline. While the reinstatement of student loans is impacting consumer sentiment in the final months of 2023, the most immediate pressures on the economic climate are the ongoing global geopolitical conflicts and the United Auto Workers strike shutting down production at various auto factories across the country.
The looming risk of a government shutdown around Thanksgiving is also likely to suppress consumer spending, prompting many to forego large purchases and instead prioritize saving if they anticipate being affected by a prolonged shutdown.
Due to these factors, consumer sentiment has already been declining, dropping by 2.3 and 2.1 percent, respectively, in August and September. At the same time, auto loan rates continue to rise for both new and used vehicles, with averages at 9.95 and 14.16 percent, respectively, at the start of October. Cox Automotive estimates that roughly 10 percent of the potential auto buying market has been priced out, stunting sales for used and more economical vehicle purchases.
The biggest question mark hanging over the auto market’s short-term prospects is the ongoing UAW strike. With no end in sight, and with the potential for the strike to expand to include more factories if a new deal isn’t reached, a lengthy strike could lead to serious supply issues creating a ripple effect across both new and used inventories.
Already, manufacturers and dealers are scaling back their new vehicle incentives, while advertising strategies are shifting away from new vehicles and prioritizing used inventories. Local auto dealers may want to follow this lead to increase both the volume of their Q4 vehicle sales while maximizing the potential return on new vehicle purchases.
The combined market challenges of vehicle affordability and the UAW strike is going to put a lid on growth in the short term. Once we get resolution with the strike, however, auto businesses can expect to see a turn toward recovery: consumers will make the new vehicle purchases they’ve temporarily delayed, inventories will start moving faster, and used inventories will become more affordable.
The strike’s short-term consequences for local auto businesses will likely be balanced out over time—but this may take until well into 2024.
Over the next decade, EV vehicle sales are expected to sharply rise and dramatically outpace sales for hybrid vehicles. Evidence of this change is already visible: more auto makers are producing EV vehicles, consumer demand is increasing, and a wider range of non-luxury EVs is improving affordability for these vehicles.
A shift to EVs is inevitable—but until the market matures a little more, hybrids are likely to be used as a stopgap solution by consumers, allowing them to access EV credits at a lower cost, and at lower price levels. With hybrids enjoying temporary gains in market share, auto dealers may want to shift their marketing strategies to emphasize these advantages and drive sales for this type of vehicle.
At the same time, certified pre-owned vehicles are seeing strong demand as a more affordable alternative to new vehicles that still offer some of the safeguards and assurances consumers seek when buying new. If new vehicle availability worsens in the coming months, certified pre-owned sales may be a critical source of revenue to stabilize dealerships.
As market conditions shift, auto businesses need to adapt their advertising strategies and messaging accordingly. Cox Media’s experts can help your business anticipate changing industry challenges and target emerging revenue opportunities in your market.
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