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As if the car industry didn’t have enough problems – with soaring gas prices, rising interest rates, empty lots, ongoing inventory shortage, higher MSRP, and lack of manufacturer incentives –  and now here comes a recession. Is it going to hurt the car dealers or the buyers – or both?

To see how the recession will impact the remaining months of 2022, first look at some stats from the second quarter of 2022. New vehicle sales were off more than 20% in Q2 as inventory shortages continued to plague the industry.

Production and inventory are stuck in low gear, far below historical levels, with no end in sight, “Cox Automotive Senior Economist Charlie Chesbrough said.

According to Marklines.com, U.S. auto sales dropped 11.7% in July 2022.

General Motors’ monthly sales dropped 9.9%, but GM reclaimed first place in sales, knocking off Toyota. Toyota sales were down 21..6% and Nissan sales were down 37.2%. The Honda drop was startling – June 2022 sales were 54% lower than a year ago. Ford increased sales 36.8% in July 2022, buoyed by trucks. But because of the lack of inventory, most of the Ford truck sales were pre-orders. Ford F-Series sales were up 21.1% from July 2021.

The EV market was an exception. Tesla Model Y was up 14.5%. Ford increased sales of electric vehicles by 176% in July, at a time when the overall market contracted. Ford now estimates it has a 10.9% share of the EV market in the United States. Used car prices remained high. Some used EVs cost more than new ones.

Now that a recession is here, what will the rest of 2022 be like for the car market?

New and used car prices will eventually come down in a recession because there will be more supply and less demand. But there will still be inventory shortages until the first quarter of 2023.

Experts are revising sales forecasts for 2022 into negative territory. Manufacturers and dealers will remain profitable because their MSRPs are higher. Ford just announced it is boosting prices for their EV vehicles up to $8000. The Mustang Mach-E GT, with an all-wheel-drive and a bigger battery pack, will increase from $62,000 to about $69,900.

No one wins in this economy. The dealer and manufacturer keep their heads above water, but the buyer loses big time. Experts say although 2023 will be better, they predict that this is the “new norm.”

While the “recession” per se won’t necessarily affect car sales, the slew of problems like inflation, interest rates, and inventory shortages will continue to impact the industry and that will be a nightmare for buyers for the rest of 2022.

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