US new car sales soared in the third quarter, despite the combination of a strike at General Motors, Ford and Stellantis, high prices and rising interest rates.
GM reported a 21% jump in sales in the quarter, compared to a year earlier. Part of the reason is a better supply of vehicles than it had available for buyers a year ago. Back then a shortage of parts, most notably computer chips, limited supplies of new vehicles and drove prices up to record levels.
Despite the strike, GM reported that it ended the quarter with the largest inventory of new vehicles on hand at dealer lots since 2020, the first year of the pandemic.
Stellantis, which sells under the Jeep, Ram, Dodge and Chrysler brands, bucked trends by reporting a 1% drop in sales, but that’s not much worse than the forecasted 1% increase in sales.
“For Stellantis, it comes down to affordability,” said Ivan Drury, analyst for sales tracker Edmunds. He said Stellantis’ existing inventory is more fully loaded with options that lift prices.
“I don’t think it’s strike-related yet,” he said. “It’s that they’re asking for a lot of money and not putting enough incentives out there to get customers coming through.”
Ford won’t report its sales until Wednesday, but sales there are forecast to be up about 8%, according to Edmunds.
Non-union electric car maker Tesla reports only global sales, not breaking out US sales. Its third-quarter sales, reported Monday, were down 7% compared to the second quarter, falling short of forecasts, but were still up 27% from the year-ago figure.
“New-vehicle sales have remained somewhat consistent as pent-up demand keeps sales afloat despite economic challenges,” said Jessica Caldwell, Edmunds’ head of insights.
Other automakers also reported strong sales gains. Toyota, the second-largest automaker in terms of US sales, reported that combined US sales at its Toyota and Lexus brands increased 12% in the quarter, a bit stronger than Edmunds’ forecast of an 11% gain. Overall, Edmunds expects industrywide US sales to be up 16%.
Strike impact
The United Auto Workers union went on strike at the three unionized automakers on September 15. But it limited the strike, initially, to just one assembly plant per company, so the supplies of automakers’ best sellers remained unchanged. Production of each company’s top sellers has not been halted by the strike. And even for vehicles where production halted the first day of the work stoppage, such as the Jeep Wrangler and Ford Bronco, there was inventory available on dealer lots and in transit from factories to dealerships.
But the UAW has been increasing plants affected by the strike. Last Friday, it added both the Ford Chicago plant that builds the Ford Explorer and Lincoln Aviator SUV, and the GM plant that builds the Chevy Traverse and Buick Enclave. The union has threatened to add more plants if there isn’t what it considers significant progress in talks.
“Right now, the effects [of the strike] are limited, and third-quarter sales were left unscathed,” said Caldwell. “However, the landscape can change dramatically, and quickly, if the strike continues.”
Rising rates
Another factor that could slow sales at all automakers is rising interest rates, which is raising the average car payment to record levels. That could leave sales a bit slower for the quarter than in the second quarter of this year when all the sales are reported.
The average interest rate on new car purchases rose 3 percentage points since last quarter to 7.4%, according to Edmunds, while rates on used car loans rose 2 percentage points to 11.2%. It’s the highest average interest rates for both types of loans since the start of the Great Recession and financial crisis of 2007.
Edmunds said the average monthly new car payment now stands at $736, up slightly from $733 in the second quarter, and that a record 17.5% of new car buyers in the quarter have car payments $1,000 or more.
“Spiked interest rates remain the biggest impediment to affordability in both the new and used car markets today,” said Caldwell. “And while the Federal Reserve held off on raising the federal funds rate in their most recent session, the expectation is rates will remain high or even increase slightly through the end of the year.”
