Toyota officials revealed the company’s revised its industry-wide prediction for new vehicle sales in the U.S. for 2022 by about 1 million vehicles. However, it’s not a lack of demand driving the number down, but a lack of availability.
Bob Carter, the company’s North American sales and marketing chief, told reporters today during a roundtable discussion the company was revising its seasonally adjusted annual rate of new vehicle sales down from 16.7 million vehicles to 15.5 million because of the ongoing problems within the industry. The first quarter SAAR was 14.3 million units.
“That’s an adjustment that, quite frankly, is not based on consumer demand,” he said. “But it’s based solely on what our projections of the supply environment’s going to be (for the remainder) of 2022.”
Carter added the company was “cautiously optimistic” and expected to sell about 2.35 million vehicles this year in the U.S., in part, because “demand remains at record highs,” but issues with the supply chain have limited the ability of automakers to take advantage of that desire for new vehicles by the public.
Change isn’t coming soon
An uptick in sales isn’t expected until the third or fourth quarter of this year, he said. Once the issues with suppliers, such as semiconductors, are sorted, it will still take “at least six months to see some semblance of normal inventories,” Carter noted.
He also noted there are a lot of “uncertainties” in the industry right now, such as the impact of Russia’s invasion of Ukraine will continue to have on the industry. He also noted the impact inflation is having on the industry, raising costs and those, on some level, are getting passed down to the buyer.
To that end, officials expected new vehicle prices to remain high. However, once the imbalance between supply and demand normalizes, which Carter believes will happen at some point in 2023, prices may come down a bit. However, automakers have already noted they don’t expect to return to the way things were in the past, in terms of supply.
The industry standard had been to have a 70-day supply of vehicles available. It was this measure that allowed buyers to drive a dealership and walk through a massive lot of new vehicles and choose something onsite. Carter said Toyota’s been at a 45-day standard for some time but is now targeting a 30-day supply — once things return to normal, reminding that most of the vehicles arriving at dealerships are already spoken for.
The suggestion that Toyota might be able to mitigate some of the cost increases through creative leasing was quickly rebuffed. Scott Cooke, senior vice president and chief financial officer, Toyota Financial Services, said interest in leasing has waned.
“We like the leasing business interest,” Cooke noted, adding “interest rates have been low for a really long time. I think customers have gotten used to having low interest rates, so we’ve had a lot more on the retail side than we’ve had on the lease side I think as an industry.”
Cooke noted leasing rates are on the rise, and have been rising quickly since the end of last year as interest rates have been slowly moving upward. However, he noted that the current unpredictability in the market that Carter referenced has been tempering the move to lease vehicles, especially since there aren’t that many available under the current conditions.
The company’s current lease rates are in the “upper middle or top 20% (range) for us. We’d like to be closer to 30 to 35. We like that. It’s a comfortable zone for us.”