Hyundai and Kia capped a year of U.S. market share gains with double-digit sales gains in December as the auto industry’s lean stockpiles continued to rebound, overcoming rising interest rates and new-vehicle prices, and the growing prospects of an economic slowdown.

Volume rose 40 percent last month to a December record of 72,058 at Hyundai Motor America, driven by a 27 percent rise in retail deliveries. Hyundai said it was its fifth straight month of record retail sales, with utility vehicles accounting for 74 percent of retail volume.

While it finished the year with five consecutive monthly sales gains, Hyundai’s 2022 U.S. sales tallied 724,265, a 2 percent decrease compared with 2021. The company said it ended December 2022 with 37,379 cars and light trucks in U.S. inventory, down slightly from 39,898 in November but up from 21,420 at the close of 2021.

At Kia, sales rose 25 percent to a December record of 60,422, its fifth straight monthly advance. The company posted U.S. sales of 693,549 in 2022, down 1.1 percent from 701,416 in 2021.

Genesis Motor America also reported record December sales — 6,172, up 23 percent — helping the brand finish the year with volume of 56,410, up 14 percent.

Other automakers will report December or fourth quarter results later Wednesday. Ford Motor Co. and Volvo are scheduled to release December sales on Thursday, followed by Mercedes-Benz and Jaguar Land Rover next week. Analysts say General Motors remains on track to reclaim the title of top-selling automaker in the U.S. after Toyota grabbed the crown in 2021.

U.S. auto sales are forecast to rise slightly in December, helped by moderately higher inventory levels and robust fleet shipments, but capping a year that will see volume drop below 14 million to the lowest level since 2011. TrueCar estimates fleet deliveries will rise 46 percent year over year to 175,317 across the industry in December.

After demand bounced back following the early months of the COVID-19 pandemic, automakers struggled to rebuild inventories throughout 2022 because of a shortage of microchips and other supply-chain bottlenecks.

Higher interest rates and new-vehicle prices are now making it more expensive for consumers to finance a purchase, forcing some to delay buying or consider a used car, even as job growth remains healthy and consumer confidence rebounds.

“There were fewer giant red bows than dealers would have liked in December,” said Charles Chesbrough, senior economist at Cox Automotive. “Given the large improvement in supply levels, it seems likely that rising interest rates are now constraining demand in the retail auto market. With record-high prices and elevated loan rates, the pool of potential new-vehicle buyers is shrinking.”

While analysts expect U.S. sales to increase in 2023, the wide range of forecasts — from 14.1 million to 15 million — underscores the clouds hovering over the industry.

“Auto consumers are plagued by an uncertain economic environment, high vehicle prices, higher interest rates, and low inventory levels,” said Chris Hopson, principal analyst at S&P Global Mobility.

The seasonally adjusted annualized rate of sales in December is expected to come in at 13 million to 13.3 million, according to forecasts from LMC Automotive, J.D. Power, TrueCar, Cox Automotive and S&P Global Mobility. That would be up slightly from December 2021’s 12.9 million pace but the lowest annualized pace of sales since May’s 12.73 million rate and June’s 13.07 million pace. The SAAR has struggled to top 15 million since July 2021, except for readings of 15.3 million in January 2022 and October 2022.

Retail stockpiles in December tallied more than one million units for the third straight month, J.D. Power and LMC Automotive said, while TrueCar estimates total new light-vehicle inventory, including fleet and commercial stock, stood at 1.8 million in December, up from 1.1 million in December 2021. The brands with the highest stockpiles last month were Buick, Ram, Jeep, Volvo, Infiniti, Jaguar, Dodge, Lincoln Chrysler, Audi and Ford, Cox Automotive said, while Toyota, Kia, Lexus, Land Rover, BMW, Honda, Subaru, Porsche, Hyundai, VW and Acura had the lowest inventory levels. 

December discounts rose slightly compared to November but remain very low. The average incentive per new vehicle was on track to drop 21 percent from December 2021 to $1,187 last month, J.D. Power and LMC Automotive said. Incentive spending per vehicle expressed as a percentage of the average vehicle MSRP was 2.5 percent last month, down 0.8 percentage points from December 2021, J.D. Power and LMC Automotive projected.

TrueCar estimates incentives averaged $1,121 per new vehicle last month, down 41 percent from December 2021 but up 4.5 percent from November.

To counter rising interest rates, some automakers are waiving payments and down payments for 90 days, or dangling finance rates as low as 1.9 percent for 60 months on certain models for eligible consumers.

“As inventory continues to build, many [automakers] are starting to feel pressure to incentivize, especially with winter storms and rising interest rates keeping more folks on the sidelines,” said Justin Colon, a vice president at TrueCar.

New-vehicle transaction prices continue to rise but at a slower pace than early in 2022. The average transaction price in December was on pace to set a record of $46,382, a 2.5 percent increase from a year earlier, J.D. Power and LMC Automotive said. TrueCar pegged average transaction prices in December at $45,628, up 2.1 percent from December 2021 but up just 0.9 percent from November 2022 levels.

  • There were 27 selling days last month, the same as December 2021, but two more than November.
  • Fleet sales are expected to total 215,500 in December, up 76 percent from December 2021 on a selling day adjusted basis, J.D. Power and LMC Automotive said, with fleet shipments expected to account for 17 percent of total light-vehicle sales, up from 10 percent a year earlier.
  • Leasing accounted for just 18 percent of retail sales in December, J.D. Power and LMC Automotive said.
  • Average interest rates for new vehicle loans were expected to increase to 6.4 percent in December, 247 basis points higher than a year earlier, J.D. Power and LMC Automotive projected.

“As we head into the new year, the industry shows signs of reverting to old customs. Markups are being reduced, incentives are inching up and a larger proportion of sales are allocated to rental fleets — all normal indicators after what has been an abnormal few years.” — TrueCar analyst Zack Krelle

“Even with the probability of an economic downturn, pent-up consumer demand from the past two years will keep inventory levels relatively low. Therefore, 2023 is likely to be another year of relative healthy pricing and profitability.” — Thomas King, vice president of data and analytics at J.D. Power