US July auto sales surge year on year, strong demand expected through H2

HOUSTON (ICIS)–US July sales of new light vehicles jumped by more than 18% year on year and are up by more than 13% year to date, and automakers expect consumers to continue buying amid pent-up demand from the past two years.

Kevin Swift, ICIS senior economist for Global Chemicals, said the strong sales numbers are the result of original equipment manufacturers (OEMs) managing inventories and selling prices holding firm amid higher interest rates.

According to data from the US Bureau of Economic Analysis (BEA), July sales edged up slightly from the previous month to a 15.74m unit pace.

The National Automobile Dealers Association (NADA) said improved inventories on dealer lots contributed to the rise in sales, and the trade group expects H2 sales to be similar to H1 and has increased its forecast for overall sales in 2023 to 15.2m units.

US automakers said during Q2 earnings conference calls that pent-up consumer demand is likely to fuel sales through the rest of the year even with headwinds from rising interest rates.

The US Federal Reserve raised its benchmark federal funds rate by a quarter of a point to 5.25-5.50 on 26 July, the 11th increase in the central bank’s past 12 meetings, as it remains focused on returning inflation to its 2% target.

Mary Bara, General Motors (GM) CEO, said on 25 July during a Q2 earnings conference call that overall demand is strong as is demand for the company’s electric vehicles (EVs).

“Demand for our EVs remains very strong because the Ultium Platform is purpose-built for electric vehicles and it does not force customers to compromise on style, performance, utility, range or towing,” Barra said.

Paul Jacobson, chief financial officer (CFO) at GM, said that when you look at the demand the company is seeing for its vehicles and as the company continues to ramp up production, they are still seeing the pent-up demand.

“As long as we see demand continuing to be as strong as it is for our vehicles, we think we’re going to continue to perform,” Jacobson said.

Jacobson said sales will be supported by increased demand from fleet purchasers.

“Obviously, we have got a lot of pent-up demand from the last few years where fleet took the brunt of some of the capacity challenges due to COVID-19 and due to the semiconductor challenges,” Jacobson said. “In fact, if you look at the first half of the year, year-to-date, it was the best fleet performance since 2007, largely fuelled by the commercial side of the business.”

Ford Motor Co president and CEO Jim Farley said volume, pricing, and software subscriptions continue to accelerate as the automaker captures significant pent-up demand across multiple commercial sectors and locations in both North America and in Europe.

“Super Duty sales in Q2 were up 28%, and the strong demand for our flagship work product is going to fuel our earnings growth for years to come,” Farley said.

John Lawler, Ford CFO, said the company is really starting to see the results.

“A fresh, exciting product lineup is driving both strong demand and price in key markets across the globe,” Lawler said.

CHEMS USED IN AUTOS
The sector is important to chemistry because a typical vehicle contains nearly $3,950 of chemistry – chemical products and chemical processing, the economist said.

Included, for example, are antifreeze and other fluids, catalysts, plastic dashboards and other components, rubber tyres and hoses, upholstery fibres, coatings and adhesives, Swift said.

Virtually every component of a light vehicle, from the front bumper to the rear taillights, features some chemistry. The latest data indicate that polymer use is about 437 lb (198 kg) per vehicle, he said.

Meanwhile, electric vehicles (EVs) and associated battery markets are an important growth opportunity for the chemical industry, with chemical producers separately developing battery materials, as well as specialty polymers and adhesives for EVs.

Focus article by Adam Yanelli

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