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Auto Sales Set to Recover in 2022

As the automotive industry begins to recover from the chip shortage, we forecast 2022 global light-vehicle demand to grow 1%-5%. However, we cannot overstate the risk to global demand if COVID-19 flares up again, shutting down auto factories and dealerships as it did in the first half of 2020. Other risks to our 2022 forecasts include possible delays in vaccine distribution, the impact of inflation and higher interest rates on the equity markets, and consumers’ willingness to spend on big-ticket items.

Another big question is Russia’s invasion of Ukraine. As a percentage of revenue, direct exposure to the Ukraine crisis is probably very limited for the automotive stocks we cover, but indirect exposure is highly uncertain. Even if we assumed zero sales in Russia for 2022, global light-vehicle demand would still be up 1% versus the 3% figure from which our forecast range of 1%-5% is built around. However, this does not adequately reflect the whole picture. Original equipment manufacturers have announced temporary production shutdowns, as disruption of the supply of one key component can have a dramatic widespread effect. Also, Russia and Ukraine are major exporters of neon gas (for microchips) while Russia also exports palladium (catalytic converters) and nickel (lithium-ion batteries, stainless steel exhaust systems). The industry is scrambling for alternative supplies of parts and raw materials.

Our Global Light-Vehicle Sales Forecast

We expect global light-vehicle sales volume to increase 1%-5% in 2022, primarily due to pent-up demand and easier second-half comparisons as the chip crisis pummeled 2021’s second half, but at the low end of market forecasts. While we expect sales of electrified vehicles to substantially increase in 2022, we do not view this as something that influences the overall level of global light-vehicle demand.

We have maintained a wider-than-normal 2 percentage points in our forecast range to reflect continued COVID-19 risks and ongoing supply chain constraints from the microchip shortage and logistics disruptions that sporadically shut down some automakers’ production, at least through the first half of 2022.

We expect the operating environment will be favorable for automakers’ profitability and returns, as demand continues to outstrip constrained production, resulting in tight inventory and supporting a solid pricing environment. However, auto suppliers’ profitability and returns will probably suffer in the first half of 2022. Automakers randomly and repeatedly turning production on and off from the chip crunch will cause dramatic swings up suppliers’ short-term cost curve as resource planning becomes nearly impossible. A more favorable operating environment should materialize in the second half as the production cadence stabilizes, albeit still at lower than prepandemic levels.

A Country-by-Country Look at Auto Sales

Many Reasons to Be Positive on U.S. Demand
We think the market has feared a recession in autos for years; with this finally occurring in 2020, we see more reasons to be optimistic long term on U.S. demand than to stay on the sidelines in fear of another crash or constant starts/stops of the economy caused by COVID-19. The chip shortage, inflation, and the pandemic bring much uncertainty, but we strongly believe there is massive demand still to be met. The fleet remains old, electric vehicles bring an exciting change to consumers as well as superior driving performance versus combustion vehicles, credit access remains healthy, and we don’t see evidence of a subprime auto lending bubble.

As of March 14, gas prices remain below their June 2008 high in real dollar terms of $5.27 a gallon, per the U.S. Energy Information Administration, though prices are likely to stay elevated in the short run as a result of Russia’s invasion of Ukraine. Also, fuel economy on light trucks is notably better than in 2008. For example, according to the U.S. Department of Energy’s site, a 2008 Chevrolet Equinox in front-wheel drive had a combined EPA fuel economy rating of 19 miles per gallon, but the 2022 version gets 28 mpg–a 47% improvement–and is able to drive 417 miles on a tank versus 380 in 2008. More space in a light truck for not a huge price premium relative to a sedan (in some cases) gives people a reason to trade in, say, a 12-year-old sedan for a 2022 crossover, pickup, or SUV. The current tight labor market, although likely inflationary due to wage growth, may also enable some consumers to splurge on a new vehicle.

Tempering these positive factors is our belief that over the long term, leasing’s contribution to new-vehicle sales cannot go much higher than levels from a few years ago, though we do think leasing penetration will rise in the near term as it has been depressed by the chip shortage reducing inventory. Used-vehicle pricing is very high, which could be a positive for new-vehicle demand initially in 2022, but it eventually will come down later this year as new-vehicle inventory rises. Loan durations hitting a ceiling is another reason we see U.S. auto sales growth slowing after 2023.

  • 2021 light-vehicle sales of 14.9 million came in far below what we had forecast, with the chip shortage getting far worse in the second half of 2021 than we anticipated. Barring another mass shutdown of the economy for COVID-19, we expect demand to recover in 2022, especially as inventory improves thanks to more chip availability in the back half of the year. For 2022, we expect about a mid-single-digit percentage increase from 2021 sales to 15.7 million-15.9 million.
  • Our 2022 outlook carries more uncertainty than normal to both the upside and downside because of the uncertain cadence of recovery from the chip shortage ravaging inventory, the war in Ukraine, and how the pandemic continues to affect the economy. Inflation is an issue in the United States for the first time in a long while, though so far we don’t see evidence of it hurting auto demand. We see very high demand that the industry cannot fully meet this year due to the chip shortage, which many auto executives don’t expect to be fully resolved until 2023.
  • The growth of light trucks in the new-vehicle sales mix slowed year over year in 2021, but some of this slowdown may be due to lack of inventory from the chip shortage. We still see high demand for light trucks, which is good news on mix for automakers, especially the Detroit Three, which get nearly all their U.S. volume from light trucks.


  • We estimate that 2022 light-vehicle demand for the European Union plus the United Kingdom will be up 2%-6%, with unit registrations of 13.5 million-14.0 million.
  • In the first half of 2021, European light-vehicle demand was relatively healthy on easy comparisons because of 2020 lockdowns. However, the chip crisis constrained production and inventory in the second half, resulting in a 0.3% full-year decline versus our forecast for a 4%-8% increase.
  • Despite the pandemic, European labor markets have remained relatively healthy, with monthly unemployment rates at 6%-7%. However, constrained production and low inventory due to the chip shortage temper our year-over-year forecast.


  • Our China 2022 light-vehicle demand outlook is at the upper end of the range of forecasts, as we estimate a 4%-8% year-over-year increase from a chip-crunch-affected 2021.
  • Pent-up demand and easier year-over-year comparisons caused by the semiconductor shortage in the second half of 2021 support our 2022 forecast.
  • We maintain our long-term light-vehicle demand forecast for a mid-single-digit average annual rate of growth.


  • We forecast Japan 2022 light-vehicle registrations to be in a range of down 1% to up 3%, or roughly 4.4 million vehicles.
  • In 2021, first-half light-vehicle registrations recovered nicely year over year from COVID-19, rising 12%, on track to meet our forecast 2%-6% full-year increase. Owing to the microchip crisis, second-half demand fell 17%, resulting in a full-year 3% decline versus 2020.
  • In our opinion, light-vehicle demand here is on a long-term slightly downward trend.


  • We expect a flat to 4% increase in light-vehicle registrations to roughly 3.6 million units.
  • Even though India demand recovered 91% in the first half of 2021 from a heavily COVID-19-affected 2020 first half, monthly seasonality was distorted by the pandemic resurgence in the spring. The second half of 2021, down 7%, showed early signs of recovery but then faltered on the chip shortage. As a result, full-year 2021 light-vehicle demand was up 26% but well below our 31%-35% forecast increase.
  • Long term, we view fiscal and monetary reforms as positive for light-vehicle demand, in conjunction with a growing middle class, supporting mid- to high-single-digit average annual growth rates.


  • We forecast a 3%-7% decline in 2022 Brazilian light-vehicle registrations to roughly 1.9 million as we expect a greater impact from the microchip shortage, relative to other countries, in the first half of the year. Even so, we think pent-up demand and better microchip availability support a significant rebound in 2023.
  • In 2021, first-half total light-vehicle registrations recovered by 32%, partially offset by lingering COVID-19 effects, but on a trajectory toward our forecast for a 23%-27% rebound. However, the chip crisis led to a year-over-year 19% second-half decline. For the year, demand was up 1% to about 2.0 million, well below our forecast recovery.
  • Owing to government corruption and the resulting civil unrest, this has always been a volatile market. However, a growing middle class, along with labor and pension reform, supports our long-term forecast demand growth rate in the mid- to upper single digits.


  • Due to greater effects from the semiconductor shortage relative to other countries, partially offset by currently high oil prices, we estimate a 3%-7% decrease in Russian light-vehicle registrations for 2022. Even so, if oil prices remain elevated and the chip crisis subsides, we think pent-up demand will drive a significant rebound in 2023 demand.
  • The Russian national economy depends heavily on the oil industry. With the price of a barrel of Brent oil declining 47% and 17% in 2015 and 2016, respectively, light-vehicle demand dropped 27% and 20% during the corresponding time frames. Despite international sanctions, with a 29% average increase in the price of Brent during 2018, Russian light-vehicle demand grew 13% in 2019.
  • With the price per barrel for Brent recently spiking to around $129 (the Morningstar energy team’s midcycle forecast is $60), as well as an accommodative fiscal policy, we would be more bullish on a 2022 recovery except for the Russian invasion of Ukraine and the microchip shortage.

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