The longer the supply squeeze lasts, the more potential
there is for “lost” or “destroyed” demand.

Global new light vehicle sales will reach nearly 83.6 million
units in 2023, a 5.6% increase year-over-year, according to a new
forecast by S&P Global Mobility, a world leader in information,
analytics and solutions. The auto industry continues to navigate
supply chain challenges while confronted by several markets facing
deteriorating economic conditions and fading pent-up demand. As
semiconductor availability plays out, demand destruction is
expected to take a more fundamental role in 2023, impacting
production and the inventory restocking cycle.

S&P Global Mobility remains wary on recovery prospects.
Destroyed demand is a key feature of the tepid forecast outlook –
impacted by a blend of general economic impacts, higher interest
rates, tight supply chains, an intensifying affordability squeeze,
higher new-car prices, weakening consumer confidence, and
heightened energy price/supply concerns. Two trailing years of
pent-up demand remains, but headwinds risk an orderly
release—including patchy recovery patterns for semiconductor
supply, energy risks (especially through a European winter), and
logistics log jams. With the auto industry already operating at, or
near, recessionary levels, the forecast outlook remains mixed at

“2023 is expected to be a year of recovery, but likely a
cautious one as the world approaches a gloomy trio of anniversaries
– three years of COVID, two years of semiconductor disruption, and
one year of Russia-Ukraine war impacts,” said Colin Couchman,
executive director, global light vehicle forecasting, S&P
Global Mobility. “The rapid zero-COVID policy exit in mainland
China provides further food for thought as we approach the New

Full-year 2022 light vehicle sales ­- projected to reach nearly
79.2 million units by S&P Global Mobility – represent a 1.3%
decline from 2021 levels.

Market-by-market forecasts

Europe: The European auto industry is suffering
supply frictions, stalling economics, energy concerns, higher raw
material/component prices, and wider security unease.
Western/Central European 2022 vehicle sales should post 12.9
million units (-6.7% y/y). Order fulfilment remains a struggle,
with long waiting lists, stretched lead times and challenging
logistics. For 2023, the narrative shifts from supply constraints
to demand destruction. With a mild recession looming for Western
Europe, 2023 demand is forecasted at 13.9 million units (+7.4%
y/y), according to S&P Global Mobility.

“For Europe, the evolving electrification transition adds
further uncertainty, especially for vehicle prices, model
availability, wait-and-see customers, and lurking Chinese OEMs,”
Couchman said.

United States: US sales volumes are expected to
reach 14.8 million units in 2023, an estimated increase of 7.0%
from the projected 2022 level of 13.8 million units. “The US auto
market is struggling, impacted by supply chain, labor, logistics,
inflation, and wider economic concerns,” said Chris Hopson,
manager, North American light vehicle sales forecast, S&P
Global Mobility.

“Ongoing supply chain challenges and recessionary fears will
result in a cautious build-back for the market. US consumers are
hunkering down, and recovery towards pre-pandemic vehicle demand
levels feels like a hard sell. Inventory and incentive activity
will be key barometers to gauge potential demand destruction.”

Mainland China: S&P Global Mobility
analysts have rebalanced the outlook on the rapid zero-COVID policy
exit, a still-weak economy, and ongoing stimulus. With 2022 set at
24.8 million units (+3.6% y/y), some demand fulfilment has been
effectively delayed into 2023-24. For 2023, the CNY100 billion
extension of NEV incentives and recovering local vehicle production
should support domestic sales -2023 should see a recovery to 25.9
million units (+4.5% y/y), according to S&P Global Mobility. The market faces
significant uncertainty as COVID infection levels could potentially
surge following the ease in COVID rules.

Production recovery momentum eases for 2023

Global light vehicle production in 2022 is expected to finish at
81.8 million units – a hard-fought 6.0% improvement over 2021
levels – in a year that has been defined once again by supply chain
constraints, debilitating lockdowns in China and, since February,
the spillover effects of Russia’s invasion of Ukraine, which has
intensified the risk of widespread recession.

For 2023, S&P Global Mobility forecasts continued growth in
output even against a backdrop which looks more challenging than
the last 12 months. Light vehicle production levels are expected to
rise by 4.0%, to 85.0 million units. While we entered 2022
imagining a return to pre-pandemic levels of production would be
achieved in 2023, this optimism is now postponed until 2025 at the

In Mainland China, S&P Global Mobility forecasts modest
production growth for 2023 of 1.1 percent, to 26.4 million units.
Europe is expected to produce 16.6 million units in 2023, up from
an estimated 15.6 million this year. For the North American region,
upside pressure surrounding restocking and fulfilling pent-up
demand provides support moving into 2023, with the forecast set at
close to 15.1 million units.

Friction in the supply chain remains, not just involving
semiconductors but also across labor and logistics – even if it is
becoming harder to identify.

The structural semiconductor capacity deficit will take years to
solve. While the supply-side issues won’t see any immediate relief,
the demand side will bring some respite. More of the existing
capacity in the sector has been allocated to automotive since the
second half of 2022, which will continue into 2023 due to slowing
demand in other chip-hungry industries like telecoms and consumer

“These conditions may mask the ongoing capacity issues the auto
industry faces,” said Jeremie Bouchaud, director, semiconductor,
E/E and autonomy practice, S&P Global Mobility. “The average
chip content per car is increasing at an accelerated rate because
of electrification, and the capacity deficit will resurface as soon
as demand from other industries picks up again. The structural chip
capacity deficit for cars will only be solved by 2024 at the

Though semiconductor availability remains an important
consideration and continues to impact production operations, demand
constraints are expected to play a more fundamental role and
accelerate in second-half 2023 and into 2024, impacting production
and influencing the speed and scale of inventory restocking.

Another major variable is emerging in Mainland China. While most
of the world has adapted to living with COVID-19, the recent
signals from Mainland China point towards a dichotomy that will be
difficult to read. The recent relaxation of strict zero-COVID
restrictions should free up businesses and services, but must be
balanced against the increase in caseloads that will inevitably

“The response of individuals, central and regional governments
to these developments will be critical to the direction of the
world’s largest market next year,” said Mark Fulthorpe, executive
director of light vehicle production forecasts, S&P Global

Electrification looks unstoppable

This year saw many OEMs double down on electrification ambitions
for the coming five to 15 years, with 2022 seeing some carmakers
dramatically scrambling to catch up. China’s NEV policy, Europe’s
“Fit for 55,” and the USA’s IRA have moved the goalposts, resulting
in electrification becoming firmly embedded in policymakers’
visions for a greener future for mobility.

S&P Global Mobility projects global demand for battery
electric passenger vehicles is on track to hit almost 10 million
units for 2023, accounting for an estimated 13.3% of global
passenger vehicle demand.

As many markets shift to greater levels of electrification, we
expect vehicle pricing to be pressured to the upside, presenting a
headwind to demand in the short-to-intermediate term. Longer-term
questions remain, especially regarding charging infrastructure,
grid power, battery supply chains, and the appropriate level of
policymaker support to help smooth the transition from fossil fuel
vehicles to electric vehicles.


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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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