The automotive industry is still struggling to produce and deliver enough new cars to meet the demand from customers. In the United States, and probably in many other markets around the globe, this shortage has a negative impact on the prices of new and used cars which, in turn, means people are generally buying and selling fewer cars than before. As a result, the average age of vehicles in the US keeps going up.
New research from S&P Global Mobility (formerly the automotive team at IHS Markit) reveals the average age of light vehicles and trucks in operation (known as VIO) in the country rises to 12.2 years in 2022, up nearly two months compared to last year. This marks the fifth consecutive year the average vehicle age in the US has risen and this year’s results represent an all-time record. The US fleet of light vehicles and light trucks climbs to 283 million.
The industry specialists at S&P Global Mobility seem to have a very clear explanation for the aging US fleet, though. We are still experiencing the effects of supply chain constraints as a result of the chip shortage, coronavirus, the war in Ukraine, and other global factors. This has led to a decrease in vehicle scrappage with fewer and fewer people deciding to wait months to get a new car instead of keeping their current vehicle in operation.
In 2021, a little over 11 million vehicles were scrapped, or the lowest annual number in the past two decades. Interestingly, the prior year saw scrappage at its record high volume in 20 years with more than 15 million vehicles scrapped.
S&P forecasts that the average age of light vehicles in operation in the United States will continue to rise through the rest of 2022 and 2023. With no light at the end of the tunnel yet for the microchip situation, there’s no hope of shortening the new vehicle production and sales pipeline. Also, new vehicles are getting more and more sophisticated which puts even more pressure on semiconductor supply, thus slowing the recovery process even further.
“While some of the new vehicle demand has been destroyed, as supply chain challenges ease, some pent-up demand for new vehicles is expected to be realized through the middle of the decade. At that time, scrappage rates could increase, creating the climate for average age to moderate or even reduce slightly,” Todd Campau, associate director of aftermarket solutions at S&P Global Mobility, predicts.