Along with indications automakers are increasing incentives, a rise in the mix of affordable vehicles to go with the overall increase in inventory puts more upside risk than downside to the 14.6 million-unit annualized rate of sales currently expected for the first quarter.

This connectivity market forecast looks at the number of vehicles being sold and global parc of operational vehicles that have factory installed connectivity from 2014 and forward looking to 2034. 

Despite record January average transaction prices, there are indications of an easing in prices, including an uptick in incentive spending, which can be traced to the steady rise in inventory that began last summer and occurring at a much faster pace than growth in sales.

Global sales should resume year-over-year growth early in 2023 – possibly with January’s results - as demand in most major markets will offset any first-quarter pandemic-related declines in China. Volume in entire-2023 is forecast by LMC Automotive to rise 6% from 2022.

The bottom line is raw volume is growing, albeit slowly, with a forecast year-over-year gain in January, as well as the entire first quarter. Because of the chaos of the past three years, January’s upward spike to a 15.6 million-unit seasonally adjusted annual rate from December’s 13.4 million is more a result of disruption to typical year-end seasonal trends than a sudden surge in demand. Annualized rates in February and March are expected to fall closer in line with current market conditions and first-quarter 2023 is forecast to total a 14.6 million-unit SAAR, which still is an increase from both the year-ago quarter and Q4-2022.

With the level of demand uncertain for 2023, unused capacity will remain a factor which could lead some automakers to start trimming available production through slower line rates, shift cuts or plant closures for indefinite periods.