NADA Data: 2022 new-car inventory up; vehicle sales per dealership down

New-car inventory rose in 2022, but the average number of new vehicles sold per dealership fell, according to the National Automobile Dealers Association's 2022 NADA Data full-year report issued in April.

New-vehicle inventory reached 1.7 million at the end of last year, up more than 50 percent from the near-historic low of 1.1 million at the start of 2022. The average number of new cars sold per dealership fell 8.5 percent to 819, down from 895 in 2021.

The NADA Data report is a twice-yearly financial profile of franchised dealerships in the U.S. There were 16,773 of them at the end of 2022, according to the report.

"Inventory was constrained, and that had ripple effects throughout the whole market," NADA Chief Economist Patrick Manzi told Automotive News. "It should be less constrained [in 2023], and we should be able to sell more cars, so it should be good for everybody across the industry."

The microchip shortage will continue to affect vehicle production in 2023 but not nearly as much as the last two years, according to the report.

"We expect inventory to continue building slowly throughout 2023 and reach nearly 2.2 million units by year-end," Manzi said in the report.

He told Automotive News that “we’re not completely out of the woods” with the microchip shortage or other supply shortages. "But things are getting better and that's a net positive."

The 55 percent year-over-year rise in inventory is significant, Manzi said.

"It doesn't seem like that much, but inventory rising from 1.1 to 1.7 [million vehicles] was a pretty big accomplishment last year because the industry had just been so starved for cars for so long," he said. "I was surprised by where sales ended up because we actually expected they would have been a bit higher at the start of the year. But again, inventory didn't recover as quickly as we all thought in 2022."

So far this year, new-vehicle sales and inventory are both up, Manzi said, with 1.8 million light vehicles on the ground and in transit to dealership lots.

The average new-car retail price in 2022 climbed 9.2 percent to $46,287, the report found.

Inflationary pressure throughout the supply chain and limited chip supply helped drive up new-vehicle prices, Manzi said, noting automakers in many cases chose to build higher-margin vehicles with the available chips.

"Looking ahead into this year, I think as the chip supply improves, we will see OEMs again able to build more affordable vehicles, more entry-level models, lower-trim vehicles," he said. "Whether they do or not, that can still be up for debate, but I think the ability to do that will improve as the chip and other supply chain issues lessen throughout the year."

Inflation is still a factor, but the industry likely will see a less dramatic year-over-year retail price increase in 2023, Manzi said.

Total sales revenue per dealership in 2022 was up to $71.9 million from $71 million in 2021. New vehicles represented 49.7 percent of total sales, with used vehicles accounting for 38.3 percent and service and parts sales accounting for 12 percent. Those percentages are similar to the 2021 breakdown.

Total sales of new electric vehicles in 2022, including direct sales by Tesla, Rivian and Lucid, totaled nearly 739,000, up 61 percent from 2021. Franchised dealers' EV sales were up to almost 260,000, accounting for 35 percent of the new EV market by year-end.

Supply chain issues continue to impact EV production, but Manzi said the industry could see a slight uptick in sales this year, with franchised dealers approaching a 40 percent share of the segment.

Annual payroll at new-car dealerships last year was up to $95 billion from $83.2 billion in 2021.

"Franchised dealers have had pretty good years the past few years, and they've shared that with many of their employees," Manzi said. "We've also seen very high inflation rates across the economy that has caused wages to rise across all industries, and the dealership industry is not immune to that. There's some of those inflation pressures at the dealership as well, and they had to pay more to get good workers."

Total dealership employment in 2022 was up to 1.07 million workers from 1.06 million workers in 2021. The average number of employees per store was 64 last year, up from 63 in 2021.

Manzi said he doesn't expect to see significant employment cuts.

"There is the risk of a recession, but I think that's a pretty slight risk at the moment," he said, noting he thinks new-vehicle sales will remain fairly strong due to pent-up demand from fleet customers primarily but also retail customers.

"With that demand that's still out there, I think dealers are going to try to hold on to the people that they've got," Manzi said. "And if anything, I think as sales volumes continue to increase over the next few years that we will see dealers hiring more."

Auction purchases in 2022 represented 17 percent of used vehicles retailed by new-car dealerships, down from 24.6 percent in 2021. Street purchases represented 13.5 percent, up from 8 percent in 2021. Fewer late-model used vehicles available at auctions and higher auction prices drove the shift in used-vehicle sourcing, Manzi said.

New-car dealerships' service and parts sales in 2022 totaled $137.5 billion compared with $125.6 billion in 2021. The difficulty customers faced in finding a new or used car to replace their current car, along with higher purchase prices, led to the uptick in service and parts sales, Manzi said.

"As the new- and used-vehicle supply improves, I think a key thing for franchised dealers is how do we keep this volume of service department work even if customers may not be as willing to fix stuff, they might just transition to a different vehicle," he said. "That's going to be a challenge for them going forward."