It’s a tricky year for automotive predictions, but analyst Michelle Krebs says, “I’ll give it a shot.”
Her new-year prognostications follow a topsy-turvy 2020 when pandemic-affected auto sales dropped to frightening levels in the spring but then recovered remarkably at the end of the year.
New-vehicle sales dropped from 17 million units in 2019 to 14.5 million in 2020, a 15% decrease. But during March and April’s dark sales days, forecasters were anticipating 2020 vehicle deliveries of 13 million for the year.
“New-car sales were surprisingly strong after spring doomsday scenarios,” says Charles Chesbrough, Cox Automotive’s senior economist.
He joined Krebs, the company’s executive analyst, and Jonathan Smoke, its chief economist, during an online presentation on what’s ahead.
Here are their six trends to track:
1. COVID fears and precautions will linger, especially with the possibility of a new form of the virus taking root. “There’s hope on the horizon with the vaccines,” says Smoke. “But everything depends on the course of the virus and our reaction to it.”
2. “The auto industry will emerge from the pandemic stronger,” Krebs says. Despite the COVID-related industry disruptions of 2020 (including the temporary closing of auto plants and car dealerships in many states), the industry showed its resiliency. That includes dealers who stepped up digital retailing efforts as an alternative way to sell vehicles, she says.
3. Inventories will remain tight in 2021. “We expect it to be a challenge, maybe less so than in 2020,” says Krebs (pictured below).
“The only big problem will be supply,” says Smoke. “We’ll see that improve, but it will still be constrained.”
“The only big problem will be supply,” says Smoke. “We’ll see that improve, but it will still be constrained.”Vehicle days’ supply went from about 180 in March to about 70 in December. “In general, that’s not bad,” Chesbrough says, citing higher dealer profits and less need for automakers to slap on customer incentives. “Lean inventory works out if people get the vehicles they want.” But it’s a problem if they can’t find a vehicle with their preferred trim level, color and other preferences.
Ironically, “the more expensive the product, the tighter the supply,” Chesbrough adds. That’s particularly the case with pickup trucks, which are spearheading vehicle sales. And they’re a big reason the average vehicle price has increased to $40,000, he says. “There were a lot of changes in 2020, but one constant remains: We are a pickup market.”
4. This year will become “the tipping point” for digital auto retailing, says Krebs. She foresees no going back, as both consumers and dealers have become more comfortable with doing much of the sales transaction online. “Many dealers believe their very survival depends on digital,” she says.
5. Electric vehicle maker Tesla will begin facing tougher competition this year. “I know we said that before, but this time we mean it,” Krebs says.
Tesla in recent years almost owned the EV market. But several mainstream automakers are bringing innovative EVs to market this year and beyond. They’re expected to give Tesla a run for its money, she says.
“EVs will start to take center stage this year,” adds Smoke.
6. Vehicle ownership will increase as ride-sharing and ride-hailing declines amid COVID fears. In contrast, many forecasters, pre-COVID, were predicting the opposite: personal vehicle ownership decreasing as alternative forms of mobility increase. Now, many virus-conscious people are loath to share vehicles.
Meanwhile, with Democrats poised to take control of the White House and Congress, Smoke predicts an increase in federal economic-stimulus and transportation infrastructure spending. That would bode well for the auto industry, he says.
Steve Finlay is a retired WardsAuto senior editor.