A Look Back On The Automotive Industry’s Last Quarter of 2023 / Blogs / Perficient

It’s best to learn from our past in order to prepare for the future. As part of that practice, let’s review what happened in the last quarter of 2023 for the automotive industry, and make some predictions on what we can expect for 2024.

Gas Prices at the Close of Q4, 2023:

Hawaii               $4.68                               National Average     $3.07

California          $4.62                               Florida                       $3.12

Washington      $4.04                              Pennsylvania            $3.35

Oklahoma         $2.59                               Virginia                     $2.93

Arkansas           $2.63                               Texas.                        $2.68

My prediction: Oil prices will be back on the rise as global demand for crude rebounds driven by China’s emergence from COVID lockdown – further swayed by a worsening of the Russia-Ukraine war.  The US is taking some oil off the market by refilling our strategic petroleum reserves.

The Purchasing Managers Index (PMI)

Manufacturing PMI: The Purchasing Managers Index (PMI) is a major economic indicator derived from the monthly survey of Private Sector Companies – and measures the change in economic activity in the manufacturing sector.

• PMI>50.00 points = Expansion
• PMI<50.00 points = Contraction
• The PMI in the U.S. was 47.90 points in December 2023, down from 49.40 points in November 2023.

Automotive Economic Factors

• For the U.S. Auto Market – “Normalcy” will sum up 2024 per Cox Automotive
• Slow growth ahead, but better than a recession
• Vehicle supply is back, favoring consumers, and placing downward pressure on prices
• In 2024, we officially bid farewell to the Sellers’ Market
• The EV Market in 2024 will be the “Year of More” – More ******, more incentives, more discounting, more advertising, and more sales muscle

Electric Vehicle Sales

EV Sales: 4^th Quarter sales were up only slightly from the 3^rd Quarter, but year-over-year growth was 46% pushing total sales to 1.1 million units.  EV’s share of retail sales is 7.4% of the market.

Here are the top EV States:

State                                                              EV Share of Retail Sales

California                                                     21.1%

Washington                                                15.4%

New Jersey                                                  10.3%

Nation                                                           7.4%

Connecticut                                                6.6%

Texas                                                              5.4%

New York                                                      4.7%

Pennsylvania                                               4.1%

Michigan                                                      3.1%

Ohio                                                              3.0%

• EV Status: More ******, more choices, more sales, 37 new ****** in 2024, 34 new ****** in 2025
• EV Inventory: The day’s supply is well above the industry average. EV inventory increased by 92% in 2023. This is a 113 days’ supply as of 12/31/2023. ICE days supply is 69 days.
• EV Transaction Prices: Started off in January 2023 at $20,000-$25,000 higher than ICE.
• As of December 31, 2023, EV average price is $50,736 and ICE average price is $48,759. This is driven by supply inventory, higher incentives, and competition.
• EV Leasing: Expected to rise further in 2024 – Treasury announced that leased EVs not assembled in North America can receive the IRS tax credits.

Today’s Fastest Growing Competitor

BYD (Build Your Dreams) sold 525,409 electric vehicles in the 4^th Quarter of 2023 vs Tesla who sold 484,507 in the same quarter.  In the full year of 2023, Tesla sales are 1.8 million electric vehicles vs 1.57 million units for BYD. However, BYD also sold 1.44 million hybrids.

BYD was founded in 1995 as a battery maker for cell phones. It also sells hybrid gas/electric cars and forecasts to sell 3.6 million total vehicles this year.

A few BYD highlights:

• BYD has outsold VW, formerly the best-selling brand in China
• BYD has Warren Buffet Berkshire Hathaway backing
• Berkshire Hathaway took a 10% stake in BYD in 2008 for $232 million. By December 2009 this investment was worth $1 billion
• BYD is now in Europe and Southeast Asia, and is already the top EV seller in Australia, Sweden, Thailand, and Israel
• Not in the US yet for cars, but BYD has become one of the largest electric bus and truck manufacturers, a segment with an easier entry point than passenger vehicles
• US/China relations are so tense that BYD executives said the US Consumer vehicle market is effectively off-limits for now
• China companies are great copiers – first car was in 2005 and looked identical to the Toyota Corolla except for the badge – they called it the F3

BYD avoids expensive investments in automation and hires thousands of workers to handle simple processes. They typically bring in employees on short-term contracts, replacing them to avoid wage increases. Some of BYD’s lowest level factory floor workers are paid $750 a month, compared to $1,000 a month at the Tesla Shanghai plant.  They make almost all the parts for the vehicles in-house with few suppliers.  They could sell the F3 for $8,000 or half the cost of the Toyota Corolla.

The EV market and economy have slowed, and there were fewer government incentives. BYD sold 21% fewer vehicles in 2019. In 2020, they came out with a 375-mile range battery – and the total car costs $30,000-$40,000 less than a Tesla S with a similar range. Its global sales quadruples from 2020-2022. BYD is China’s top seller of EVs and plug-in hybrids. China’s market is 33% full EV and plug-in hybrid. BYD’s big push has been electric buses in the US, UK, and Japan over the past decade, and they are also building plants with more automation.

What’s the Next Bottleneck?

Over the last 24 months, chip availability used in vehicle production has been a major issue.  Elon Musk thinks of vehicles as computers on wheels – all controlled by chips. It was chips in 2022-2023 that caused a slowdown, but in 2024-2025, it could be graphite. China’s new restriction on exports of graphite – a key material for electric vehicle batteries – is casting uncertainty on US EV battery production. China, effective December 1, 2023, requires export permits for certain graphite products for use in EV batteries.

Graphite is the main component in lithium-ion batteries and accounts for more mass than lithium, cobalt, manganese, and other materials used in the cathode and elsewhere in the battery. The US needs a million tons per year – the current capacity is zero in North America.

General Automotive Highlights

• 2024 North America – Car, Truck, SUV of the Year Award
  • Car: Toyota Prius/Prius Prime
  • Truck: Ford F-Series Super Duty Pick-ups
  • SUV: Kia EV9
• Demand for EVs continued to climb, but at a slower pace than expected. Ford, GM, and others postponed or cut back investment in anticipation of a more gradual transition into an electric future
• Lithia is the number 1 Automotive group based in the US – they’ve expanded in the UK with the purchase of Jardine Motors and the Pendragon Group
• Hyundai – Amazon to sell new vehicles through Amazon’s website. Where will this go? What OEMs will follow?

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