Auto Sales Withstand Higher Interest Rates, So Far

Automakers have mostly overcome the supply-chain challenges that upended production early in the pandemic. Now they are trying to weather a new challenge: higher borrowing costs for their customers.

General Motors and several other automakers reported on Monday that new-vehicle sales increased substantially in the first three months of the year, thanks to improved supplies of key components and firm demand from both consumers and commercial customers.

But the steady interest rate increases in the last 12 months have raised questions about whether the industry can maintain its sales momentum throughout 2023.

Jonathan Smoke, the chief economist at the market research firm Cox Automotive, said higher rates were already starting to put new vehicles out of the reach of buyers with lower incomes or weaker credit scores.

According to Cox, “subprime” borrowers — those with weaker credit profiles — make up just under 6 percent of all new-car purchases, down from 18 percent five years ago. Car buyers paid an average interest rate of 8.95 percent last month, up from 5.66 percent in March 2022.

The average monthly payment on new vehicles was $784 in February, compared with $681 a year earlier, Cox calculated.

“Affordability challenges are limiting access to the vehicle market,” Mr. Smoke said. “Higher interest rates are having a huge impact.”

Sticker prices have also challenged buyers. Auto prices — for new and used vehicles alike — have been a prominent driver of inflation over the last two years, although there are signs they are cooling off. The average price for a new car or light truck in February was $48,763, according to Cox — up from $46,297 a year earlier, but down from $49,468 in January.

Mr. Smoke said automakers got off to a strong start in January and February, but saw credit tighten somewhat in March after the banking industry was shaken by the collapse of Silicon Valley Bank and Signature Bank.

G.M. said its new-vehicle sales in the United States rose 18 percent in the first three months of the year, to 603,208 cars and trucks. Sales to consumers rose 15 percent and sales to rental, corporate and government fleet customers increased 27 percent.

In the last several months, G.M. has been able to keep its factories humming as a result of steadier supplies of computer chips and other critical parts. The company ended the quarter with 412,285 vehicles in dealer stocks, up slightly from what it had at the end of 2022, but nearly 140,000 more than it had a year earlier.

Honda Motor reported that its U.S. sales increased 7 percent to 284,507 cars and trucks, while Nissan saw a gain of 17 percent, to 235,818. Hyundai said its U.S. sales rose 16 percent to 184,449.

Toyota Motor, however, has continued to suffered from parts shortages that have left its dealers with slim inventories. Its first-quarter sales fell 9 percent to 469,558 cars and trucks. Stellantis, formed through the merger of Fiat Chrysler and Peugeot SA, also reported a decline. Its sales fell 9 percent to 368,327 cars and trucks.

Ford Motor is scheduled to report its latest sales figures on Tuesday.

G.M. has forecast a rapid increase this year in sales of electric vehicles; so far, it is off to an uneven start. The company sold 19,700 Chevrolet Bolt compacts in the first quarter, more than three times the total a year earlier, but other models have yet to make a splash.

Sales of the Cadillac Lyriq, an electric sport-utility vehicle, totaled just 968, and G.M. sold only two GMC Hummer E.V.s, down from 99 in the first quarter of 2022.

G.M. started production last summer at a new plant in Ohio that is supposed to provide battery packs for the Hummer E.V., the Lyriq and several other vehicles scheduled to arrive in showrooms this year. They include electric versions of the Chevrolet Silverado pickup and the Chevy Equinox and Blazer S.U.V.s.

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