US Vehicle Prices Reach Record High as Interest Rates Keep Rising

Despite the high interest rates affecting the US, there is a strong demand for new vehicles that might lead the prices of new vehicles to hit record highs. According to a report from consultancy firms J.D. Power and LMC Automotive, the low supply and high demand of new vehicles are causing average transaction prices to increase by 11.5 percent, reaching a record US$46,259.

Although the US government recently approved the Inflation Reduction Act of 2022, its effects will not be seen in the short term due to limited EV availability. "In September, the constraints are expected to continue with sales being hampered by available inventory. In the near term, prices and per-unit profitability will remain strong," said Thomas King, President of Data and Analytics Division, J.D. Power, according to Reuters.

The US Federal Reserve’s actions to tame inflation have not made a visible impact on vehicle prices. “Even though the sales pace is down 2.6 percent year over year, buyers will still spend nearly US$45.4 billion on new vehicles this month, the second-highest level ever for August and up 13.0 percent from August 2021,” reported Forbes.

Vehicle sales in Mexico continue increasing, albeit slowly. The Mexican Automotive Industry Association (AMIA) and the Mexican Association of Automobile Distributors (AMDA) reported that during July there were 83,137 units sold in the country, a 1.2 percent increase from the same month last year, according to data from the National Institute of Statistics and Geography (INEGI). 

The Inflation Reduction Act is expected to benefit Mexico’s automotive industry as it includes stipulations for EVs assembled in Mexico. The bill requires at least 40 percent of battery components to be sourced from the US or any country part of the United States-Mexico-Canada Agreement (USMCA). “Teamwork and coordination of the Ministry of Economy with SEDECO, the Embassy of Mexico in the US and our counterparts were key to not discriminate our automotive industry in the Inflation Reduction Act that was approved by the US Senate and that will go to the House of Representatives,” said Tatiana Clouthier, Mexico’s Minister of Economy, as reported by MBN.