A Toyota executive told Automotive News that the average price of a new car would be more than $50,000 by 2023. The head of sales for Toyota North America, Jack Hollis, said that the company wouldn’t be able to meet the demand for new cars if supply-chain problems caused by the pandemic continue in 2023. Higher costs for raw materials are another factor. Some of these costs are passed on to customers, but Hollis says that Toyota is “eating it in our profitability.” J.D. Power says that the average price of a new car hit a new high in February, going up by 4.8% from the previous year to $46,229. Even though the recent steady increases might seem unsustainable and like the bubble is about to pop, a Toyota executive thinks the average will only keep going up. The head of sales for Toyota’s North American division, Jack Hollis, told Automotive News that the average transaction price would be more than $50,000 by 2023. Even though Hollis thinks a recession has already started, the demand for new cars is still very high. This is different from how a market is supposed to act during a downturn. Hollis promised that all of the vehicles his company manufactured would find buyers. The fragile supply chain prevents normalcy. Hollis says that if there were no problems with supply, the U.S. car market could make nearly 17 million sales in 2023. “another 2 million vehicles added to pent-up demand” after this year’s expected 15 million sales. Because of this, there will still be a lot of demand for used cars, so depreciation will be lower and residual values will be higher. Bob Young, vice president of purchasing and supplier development at Toyota, says that the main reason prices are increasing is that the cost of raw materials is rising. Even though Young says this area is improving, material prices won’t go down for consumers until 2024. Hollis says that Toyota and Lexus, who sold 2.1 million cars in the U.S. in 2022, could sell 100,000 more cars while losing market share. Car companies may also have to pay more for their raw materials. Hollis stated that the company was “eating it into profitability.” Because of the high demand, the company thinks that by the end of 2023, there will only be about 30,000 cars on dealer lots, which is the same number as at the end of 2022.
