Supply Chain, Chips, and Inflation: The Story Behind Low Sales

Tim Healey
by Tim Healey
supply chain chips and inflation the story behind low sales

Following up on our sales post from earlier, we look to The New York Times, which has listed several possible reasons for why the numbers are dire.

The reasons are predictable, but that doesn't mean they aren't true.

As Mr. Guy noted in his roundup, the industry is expected to see under 14 million units moved in 2022. That's not considered to be a healthy number. So why is the number so low? Inflation, supply-chain problems, and a lack of computer chips, say analysts.

“It seems likely that rising interest rates are now constraining demand in the retail auto market,” Charles Chesbrough, senior economist at market researcher Cox Automotive, said in a statement to The Times. “With record-high prices and elevated loan rates, the pool of potential new-vehicle buyers is shrinking.”

Toyota did see a sales bump of 13 percent year over year in the fourth quarter, so perhaps the chip shortage is easing.

Then again, the rise in interest rates as the Fed tries to halt inflation could keep buyers at bay since the cost of borrowing is up. Speaking of up, the average transaction price, as reported to the Times by Edmund's, is now up to an all-time high of $47,681.

“Rising interest rates are increasingly top of mind for consumers in all aspects of life, including auto loans,” Ivan Drury, director of insights at Edmunds, told the Times. “Even rates that are near or slightly below average can rack up thousands more in interest paid compared to years past.”

None of this should be new to anyone who read Guy's post earlier, or who has been following the industry on these digital pages over the past three years, but I still found it interesting to have it laid out so clearly. To paraphrase our favorite Oldsmobile enthusiast, the industry does indeed face plenty of headwinds. But perhaps the chip shortage will end and the supply chain will smooth out. Now, if only that pesky inflation would go away...

[Image: Marek Musil/Shutterstock]

Become a TTAC insider. Get the latest news, features, TTAC takes, and everything else that gets to the truth about cars first by  subscribing to our newsletter.

Join the conversation
6 of 59 comments
  • Kcflyer Kcflyer on Jan 05, 2023

    I'm told it's just transitory :)

  • JMII JMII on Jan 05, 2023

    Since I just bought my first brand new vehicle in 20 years I bet cars will be 50% off tomorrow just to screw me 🤪

    Inventory is creeping up but the dealers I spoke with are still not moving on price. I lucked out with a last day of the year delivery. I only pulled the trigger because I got 0% for 3 years and free money is hard to ignore. I came to the conclusion that life is too short, I had the means and wanted the vehicle, so if MSRP is the best I could get then so be it. I spent nearly a year watching inventory and pricing that only wiggled slightly. Meanwhile my investments dropped so if I was going to burn money it might as well be in a comfortable new ride.

    • See 3 previous
    • Jeff S Jeff S on Jan 05, 2023

      Congratulations on your new Santa Cruz which you have waited for a long time. I felt like a won the lottery when I got my Maverick after waiting 8 1/2 months. I just ordered a new mountain bike at the local bike shop they have an oversupply and I got 25% off but it is still about double what I paid 18 years ago for my old one which I am going to keep. Apparently most bicycles are made in Taiwan and Taiwan has made too many bicycles to meet the demand which skyrocketed during Covid but now has slowed down (bought a Rockhopper and have a Mongoose). Housing around me has really slowed down and the local Ford dealer is offering 5k off MSRP for 2022 Escapes so maybe things are getting better.

  • Jeff S The Cybertruck is one of the most hyped vehicles in decades.
  • Nrd515 This is all I could think of seeing this. I saw it in the theater with my dad about 59 years or so ago:
  • Art Vandelay I have no illusions tha my Challenger was going to be a car I wanted to own 10 seconds out of warranty. Fun, sure. Fun in 8 years? Hard pass based on the 2 years I had it
  • ToolGuy Weren't some of the most powerful engines in the M4 Sherman air-cooled? (And supercharged.)
  • ToolGuy "I installed oil temp and cylinder head temp gauges on various vehicles I was driving, so I could monitor how the engine was doing. I switched from my normal 20W50 and dropped to 15W40 oil and put down thousands of miles. Within that time, I saw a noticeable decrease in oil temps and even cylinder head temps while driving in different situations."ToolGuy has great admiration for your use of the scientific method in conducting original research.