5 Auto Predictions That Could Affect You In 2022

The last two years have been anything but easy to predict for the automotive industry due to the pandemic and the resulting microchip shortage.  So what does the coming year look like for the industry and the car shopper?  In the early days of 2022, the Cox Automotive Industry Insights team says it laid out trends that will shape the auto industry in the year ahead. Cox has been a trusted source of mine for many years.

5 Auto Predictions For 2022 

Big picture wise, the Cox Automotive team says overall it's optimistic for the industry this year. According to its press release, researchers expect new-vehicle sales to reach 16.0 million in 2022, an increase of more than 7% from 2021.  Researchers also think used-vehicle sales will remain strong this year and top the 39 million mark.  As for inventory challenges, Cox believes we'll still see them in the first half of 2022, but predicts things should improve in the second half. Unlike 2021, the second half of 2022 will likely be stronger than the first half.

When it comes to making predictions, however, even the Cox Automotive Industry Insights team admits that looking forward and into the future is never easy.  

“As we move into 2022, our team has a number of expectations for the industry,” notes Cox Automotive Chief Economist Jonathan Smoke. “We believe the auto business is in for a healthy year. Yes, there will be unexpected pitfalls, but those who remain flexible and agile will manage just fine in the year ahead.”

Here are some of the trends the Cox Automotive Industry Insights team predicts will shape the auto business in 2022,  as listed in its press release:

#1: VEHICLE DEMAND WILL REMAIN ROBUST, ESPECIALLY THROUGH THE FIRST HALF

While the pandemic has been rough on many U.S. consumers, there is sufficient demand in the market to support healthy new- and used-vehicle sales in the year ahead. Recent surveys indicate consumers are expecting higher vehicle prices in 2022, but enough buyers will be in market to support 16 million new-vehicle sales, according to the Cox Automotive 2022 forecast. Total used-vehicle sales are forecast to be 39.3 million, down slightly from 2021 but still a healthy volume.

#2: USED-VEHICLE VALUES WILL DEPRECIATE AGAIN, AFTER THE SPRING

Last year, with new-vehicle inventory historically low, used-vehicle demand increased notably, driving prices higher. At auction, used-vehicle values set new records in each of the final four months of 2021, according to the Manheim Used Vehicle Value Index. Retail prices followed, with the average used-vehicle listing price above $28,000 in December 2021, a record. Used-vehicle prices normally increase in the spring, so the market will see further gains. In the second half of 2022, however, the team is forecasting price increases to end, and a more normal pattern of depreciation to resume.

#3: TIGHT VEHICLE SUPPLY WILL GRADUALLY IMPROVE

The central story for the auto industry in 2021 was tight inventory. Supply chain disruptions and production slowdowns due to COVID outbreaks wreaked havoc on product availability, and never in memory was new-vehicle inventory lower. In the second half of 2021, inventory was roughly one-third of the pre-pandemic level, dropping below 1 million units. The process will be slow, but the Cox Automotive team believes new vehicle inventory issues will gradually improve in the year ahead: The worst of the ‘empty-lot syndrome’ is likely in the rearview mirror.

#4: EV GROWTH WILL OUTPACE INDUSTRY GROWTH

While the overall new-vehicle market struggled in 2021 and was up only 3.5% from a rough 2020, the market for electrified vehicles boomed. Hybrids, plug-in hybrids and pure battery electric vehicles sales surged, with new entries and plenty of newly interested buyers. Tesla is still the dominant brand in the pure EV market, but new product from Ford, Hyundai, Kia, Volkswagen and Volvo are driving solid growth. Gas prices are elevated going into 2022, and 38% of new-vehicle shoppers are now considering an EV. In 2022, further strong growth is expected, especially as high-profile EV pickups begin to enter the market. Production of the new Rivian RT1 pickup is underway; the Ford F-150 Lightning is scheduled to be on the road by spring.

#5: AUTO LOAN RATES WILL RISE

Low auto loan interest rates have helped take the sting out of rapidly rising vehicle prices. Unfortunately, the end is near. Inflation is at the highest level since 1982, and the Federal Reserve Bank is ready to address that with expectations for three, quarter-point rate increases in 2022, followed by three in 2023 and two more in 2024. Generally speaking, the Cox Automotive team expects auto loan rates to be higher by the end of 2022. From a historical perspective, rates would still be low and attractive. However, the increase would mean an end to the 2021 financing trend that helped mitigate some of the vehicle price inflation.

To see the the complete list of trends click here.