Toyota Executive Expects Average New-Car Prices to Exceed $50K in 2023
A Toyota executive believes average new-car prices will surpass the $50,000 mark in 2023, according to a report by Automotive News.
Jack Hollis, head of sales for Toyota North America, said demand will keep exceeding the company's ability to build new vehicles, as pandemic-induced supply-chain issues continue in 2023.
Higher costs of ram materials are also a contributing factor, and while some of these costs are being passed onto the consumers, Hollis said Toyota is "eating it in our own profitability."
In February, average new-car prices reached a new peak, jumping by 4.8 percent from a year ago to $46,229, according to J.D. Power. The consistent increases over the past few years may seem untenable—like the bubble will have to burst soon—but a Toyota executive thinks the average is only going to continue rising. Jack Hollis, head of sales for Toyota's North American division, said he believes the average transaction price will crest the $50,000 mark in 2023, as reported by Automotive News.
Although Hollis believes that an economic recession is already underway, it does not match the usual expectations for how the market in recession should behave, with demand for new cars remaining extremely high. "We will sell every vehicle that we can make," Hollis explained. "The only thing holding us back is the totality of the supply chain and the fragility of it, because we're not back to normal anywhere globally."
Hollis thinks that the U.S. car market could account for nearly 17 million sales in 2023, if it weren't for supply issues. The 15 million predicted sales for this year leaves "another 2 million vehicles added to pent-up demand." This will result in continued strong demand in the used-car market, lessening depreciation and keeping residual values high.
The rising prices have mostly been the result of higher raw material costs, according to Bob Young, vice president of purchasing supplier development for Toyota. While Young says there are starting to be improvements in this area, the reduction in material prices likely won't be seen by consumers until 2024.
Hollis predicts that Toyota and Lexus—which combined moved 2.1 million units in the U.S. in 2022—could add another 100,000 sales, but the company's market share might suffer. The higher material prices might also need to be soaked up by the automakers. Hollis acknowledged they are trying to figure out how much they can pass onto consumers, but said, "We're eating it in our own profitability."
The company expects to end 2023 similarly to how it ended 2022, with only around 30,000 vehicles in inventory on dealership lots due to the heavy demand.
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