Business

Auto sales in 2020 expected to hit lowest point in nearly a decade

fr24news– The U.S. auto industry is set to release its lowest annual sales total in nearly a decade on Tuesday, as the fallout from the Covid-19 crisis in 2020 shattered a record for the U.S. auto industry.

But a strong rebound in demand in the second half of the year led buyers to pay record sums for new wheels, boosting profits for automakers and giving executives optimism for a sustainable recovery in 2021.

Analysts at several research companies expect US vehicle sales to total 14.4 million to 14.6 million in 2020, down about 15% from a year ago earlier and the lowest level since at least 2012. The drop broke an unprecedented five-year period in which sales topped 17 million vehicles per year.
The top figure tells only part of the story of a year in reverse in the auto industry, which included industry-wide plant closures last spring, soaring prices of new and used vehicles and changes in the way Americans buy cars.

Car sales

Covid-19-related plant closures last spring led to months of tight inventory, pushing vehicle prices up.

Vehicle Sales and Inventory, United States

Change in market share,

United States 2019-20 ††

Avg. transaction price, United States

Vehicle production, North America

Now analysts believe the conditions are in place to further improve results this year, supported by near-record interest rates and another round of federal stimulus, including direct payments to some Americans from this week. . Dealers and executives are optimistic that the fallout from the pandemic will boost demand for new cars, with some consumers opting to own a personal vehicle over public transit or shared rides.

Still, potential pitfalls remain, including the unknown duration of the pandemic, an ongoing shortage of dealer inventory, and possible supply chain issues, including uneven availability of semiconductor chips.

The bottom line for 2020 is likely a relief for auto executives who feared the worst last spring, when their North American factories were shut down due to Covid-19 for nearly two months, and analysts stood by. asked if people would buy cars in the middle of a pandemic. Some forecasters had predicted that 2020 sales would fall below 13 million vehicles.

By the end of the spring, however, car buyers started to grow in surprisingly high numbers. Automakers, which quickly put safety protocols in place to prevent the virus from spreading among factory workers, have since struggled to meet demand.

“The resilience of industry and consumers has amazed me,” said Jeff Schuster, president of global forecasting at research firm LMC Automotive.

Today, the industry faces a persistent inventory crisis that is expected to last until 2021, according to dealers and executives. Inventories of new vehicles at U.S. dealerships have been about 25% below normal for months, with more severe shortages of large pickup trucks. This held back overall sales, but also resulted in a seller’s market, pushing prices up to record levels, as well as profits for some automakers, dealers and parts suppliers.

The average price paid for a vehicle in December was around $ 38,000, up from around $ 34,000 in early 2020, research firm JD Power estimates. Dealers with only half-full lots have been stingier with discounts, said Tyson Jominy, vice president of data and analytics at JD Power. On top of that, buyers are turning to bigger, more expensive vehicles like pickup trucks, he said.

Another factor, dealers say, is that some quarantine-weary American consumers – forced to forgo travel and dining out – have spent their money on big-ticket items like boats, home projects and new cars.

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Chicago-area dealer Mike Maheras said his three Chevrolet dealers in Illinois have been working to meet demand for high-end pickup trucks. Stores, which normally keep more than 100 days of truck supply on their lots, have been operating for less than a month.

“We are seeing a strong pent-up demand for trucks,” he said. “Instead of taking vacations, customers indulge in their vehicle purchases. ”

Some dealers say 2020 was one of the most profitable years in their history, in part thanks to better prices and surprisingly strong used car sales. Used cars – a key profit center for dealerships – have been hot, in part because the shortage of new vehicles has driven more customers to the used lot.

Analysts predict that automakers will remain in catch-up mode on inventory replenishment for much of the year, which will likely lead to better profit margins for manufacturers and dealers – and fewer offers for consumers.

Research firm IHS Markit recently said it expects demand for new cars to remain healthy, but is wary of lingering supply chain problems linked to a pandemic that could hurt the market. production. He expects tight stocks to last until 2021.

IHS sets US vehicle sales in 2021 at around 16 million, which would be an increase of around 10% from last year.

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