How Will the Recession Impact the Auto Industry in 2023?

by Ben Price

With an economic recession now upon us, many auto industry workers are wondering how the industry will be impacted in the coming months. With ongoing supply chain issues, interest rates at an all time high, and inflation climbing at an unprecedented rate, it’s no wonder why folks are worried about how the auto industry will be impacted – here are some estimations regarding how the auto industry will be impacted by the recession in 2023.

Recession May Have Limited Effect on Used Car Market

Despite the recent increased production of new vehicles, it’s unlikely that the recession will have much of an effect on the used car market. Business Car recently shared that, historically, past recessions have not caused used car prices to fall substantially, therefore we should not expect the case with this recession either.

The reason behind this is buyers, who have tighter budgets during the recession, switch from new to used car purchases which increases demand as a result. So while we recently saw increased production of new cars, we also saw price increases as well; those who can afford them may end up buying new, but used cars aren’t likely to fall much because of the higher MSRP of new cars.

This, combined with additional inventory, should make for a better year for auto dealers – they should be able to fill their lots with less difficulty, without having to lower their prices by much.

Auto Manufacturer Layoffs May be Next

A recent article by CFO Dive reported auto manufacturers may be the next for major workforce cuts, following major tech companies like Amazon, Twitter, and Meta making major company-wide layoffs. This occurred because of these tech companies’ heavy reliance on the supply chain –  Apple, Microsoft, Amazon, Alphabet, and Meta lost more than $3 trillion in value this year due to the supply chain, according to Bloomberg

Auto manufacturers are also likely to be hit hard by layoffs in the coming months, since the industry is also facing issues regarding the sourcing of parts and high interest rates. Company leaders are more likely to do so as it would cut costs, and many manufacturers have cited the shift to electric vehicles as their main motivation.

A Market Crash is Unlikely

While many experts are somewhat split regarding when and how significantly used car prices will fall, the majority seem to believe that some sort of major crash is very unlikely. To reiterate what was stated above, used car prices are not likely to fall too far below their current prices – or at least to the pre-COVID prices or lower – next year. While still expensive, used car prices are still more appealing to middle-class consumers than new vehicles.

Additionally, car dealerships have no reason to cut their prices any more than they already have as the demand continues to remain high.

While the recession will have some effects on the industry, it may be less significant than others have surmised. Overall, the economy isn’t in the best shape, but we can hope that businesses– both big and small– can weather the storm, and manage to come out on top.

Try Super Dispatch

If you happen to operate an auto business, whether it is an auto dealership, auto transport brokerage, auto auction, or car hauling business, you might be experiencing a bit of hardship yourself. If that’s the case, then you need to cut costs wherever possible – to do that, you should have reliable software that can help you save time and money. 

Super Dispatch is an all-in-one platform for moving cars, and is the perfect tool for your business. Auto dealers, auctions, and brokers can request a demo of our Shipper TMS!

Published on December 20, 2022


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