Car sales in 2020 are expected to reach the lowest point in nearly a decade

Car sales in 2020 are expected to reach the lowest point in nearly a decade

The US auto industry is expected to record its lowest annual sales rate in nearly a decade on Tuesday, as the fallout from the Covid-19 crisis reversed in 2020. Record race for the American auto sector.

But a sharp pickup in demand in the second half of the year prompted shoppers to pay record amounts for new wheels, boosting auto company profits and giving executives optimism about a sustainable recovery in 2021.

Analysts expect from several research firms that US auto sales will reach 14.4 million to 14.6 million in 2020, which will drop nearly 15% from the previous year and the lowest level since at least 2012. Sales exceeded 17 million cars annually.

The higher number only tells part of the story of a volatile year in the auto industry, though, a year included Factory shutdown at the industry level Last spring, High prices for new and used cars And the Shifts in the way Americans shop For cars.

Selling cars

The factory shutdowns linked to Covid-19 last spring have squeezed stocks for months, driving up car prices.

Vehicle Inventory and Sales, United States

Changing market share,

United States 2019-20 ††

Average transaction price, United States

Vehicle Production, North America

Vehicle Inventory and Sales, United States

Changing market share,

United States 2019-20 ††

Average transaction price, United States

New car sales and inventory, US

Average transaction price, United States

Vehicle Production, North America

Market Share Change, US 2019-20 ††

Now, analysts say conditions are in place for a further lift in results this year, supported by record low interest rates and another round of federal stimulus, including Direct payments to some Americans Beginning of this week. Dealers and executives are optimistic that the fallout from the epidemic will spur demand for new cars as some consumers choose to own personal vehicles over public transportation or shared trips.

However, potential risks remain, including the unknown duration of the pandemic, ongoing shortages of dealer stocks and potential supply chain hurdles, including Intermittent availability of semiconductor chips.

The net result for 2020 was likely a relief to auto managers who feared the worst last spring, when their factories in North America were closed due to Covid-19 for nearly two months, and analysts questioned whether people would buy cars amid a pandemic. Some forecasters expected 2020 sales to fall below 13 million cars.

However, by late spring, car buyers were starting to emerge in unexpectedly strong numbers. Since then, auto companies, which have quickly put in place safety protocols to prevent the virus from spreading among factory workers, have sought to meet demand.

“I was amazed by the resilience of the industry and the consumer,” said Jeff Schuster, head of global forecasting at research firm LMC Automotive.

Now, the industry is facing a prolonged inventory crisis that is expected to last into 2021, dealers and executives say. Inventories of new cars at US dealerships have been running nearly 25% less than usual for months, with a severe shortage of large pickup trucks. This reduced the overall sales, but also gave rise to a seller’s market, Send prices to record levelsBesides the profits of some auto companies, dealers, and parts suppliers.

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The average price paid for a car in December was around $ 38,000, up from around $ 34,000 in early 2020, according to an estimate by research firm JD Power. Tyson Jominy, vice president of data and analytics at J.D. Power, said merchants whose stakes were only half filled were more miserly with discounts. Moreover, buyers are turning towards larger and more expensive cars such as pickup trucks.

Another factor, merchants say, is that some quarantined-exhausted US consumers – forced to give up traveling and eating out –They spent their money on very expensive goods Such as boats, home projects, and new cars.

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Have you or someone you know bought a car during the pandemic? What was your experience? Join the conversation below.

Chicago area dealer Mike Maheras said his three Illinois Chevrolet dealerships have strained to meet the demand for high-end pick-up trucks. The stores, which usually keep more than 100 days of truck supplies in their pieces, are running for less than one month.

“We see a lot of pent-up demand for trucks,” he said. “Instead of taking vacations, customers deal with their purchases of their cars.”

Some dealers say 2020 has been among the most profitable years ever, due in part to better prices and surprisingly strong used car sales. Used cars – a major profit center for dealers – have been hot, in part because a shortage of new cars has pushed more customers to pre-owned parts.

Analysts expect auto makers to remain catch-up when restocking inventory for most of the year, likely leading to better profit margins for manufacturers and dealers – and lower deals for consumers.

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Research company

IHS Markit

It recently said it expects demand for new cars to remain healthy, but is wary of supply chain obstacles linked to the pandemic that could hinder production. It expects tight stocks to continue until 2021.

IHS pegs US auto sales for 2021 to around 16 million, which is roughly 10% more than last year.

Write to Mike Colias at [email protected]

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