Vehicles For Sale on Car Dealer Lot.

U.S. Auto Market 2020 Flashback and Looking Ahead to 2021

As we flip the calendar, let us look back at the major stories and trends of the U.S. auto sector in 2020 that managed to grab headlines. The automotive industry — which had been already grappling with various challenges including new-emission standards, trade war, rising costs amid technological shift, and robust demand for ride-sharing services — further got plagued by coronavirus woes. The pandemic was indeed a wake-up call for automakers who actively engaged in adapting to the industry’s changing dynamics amid the virus mayhem.

Carmakers Lend Helping Hand in COVID-19 Fight:

Due to the supply shortage of ventilators and face masks amid soaring coronavirus cases, auto biggies shifted gears and came forward to do their best in the face of the global health crisis. As car factories were shuttered, various auto manufacturing giants heeded the call of government authorities and manufactured the much-needed supplies to battle the pandemic. General Motors tied up with Ventec Life Systems to boost the production of respiratory care products. Ford collaborated with GE Healthcare to expand the production of a simplified version of the latter’s existing ventilator design. While the need for ventilators is not as pressing as they were during the start of the pandemic, automakers are still cranking out masks amid the second wave of coronavirus.

Auto Engines Restart Gradually:

 With COVID restrictions easing and people getting used to a new normal, vehicle sales are gradually on the mend. At least, that’s what third-quarter sales numbers of various auto biggies reflected. While sales of most firms declined year over year, the metric improved from the prior quarter. Importantly, the recovery gained traction especially in September, as sales rebounded from coronavirus-led lows and even grew year over year. The annualized selling rate rebounded to more than 16 million by September after plunging to around 8.8 million in April. Sales growth for September marked the first monthly rise since February. Preference for private transportation amid the pandemic, easier credit conditions with low auto loan interests, and rising e-commerce initiatives helped the companies in stoking sales.

Motor Show Schedules Turn Topsy Turvy:

Social distancing being the theme of the year, big-ticket auto shows were axed this year. It started with Geneva’s Motor Show cancellation. Post that, all major auto shows including New York Auto Show, Detroit Show, and Los Angeles Auto show were scrapped. However, auto companies did not tap brakes on their plans to launch models. True to the saying ‘the show must go on’, automakers aggressively switched from in-person reveals to online events. With digital unveilings turning out to be successful for carmakers, it remains to be seen what the future holds for annual motor show events. Well, the trend of digital launches will most likely continue till at least next year, with CES and the NADA Expos going online in 2021.

Digital Retailing Becomes Red Hot

After a coronavirus-induced lockdown of several cities, online purchases of cars got increasingly popular. Socially-distant digital sales have come squarely into focus, with carmakers revving up efforts in online advertising through websites and social networks. The launch of the simple, secure, and user-friendly online platform is aiding the seamless end-to-end digitization of companies’ sales processes. Ship-to-home next day, curbside pick-up option, as well as buying online & pick-up in stores options picked pace, thereby helping dealers to generate sales amid tough times. Thanks to the coronavirus pandemic, auto retailers truly embraced the potential of digital commerce this year. Auction companies also had to rely on digital formats.

Race to E-Mobility Scales New Heights:

The electric vehicle (EV) market was one of the hottest industries in 2020. EV stocks experienced huge gains as investors bet big on the future of e-mobility. A shift toward the electric future made it necessary for industry players to reorient their business model and accelerate the EV game. Various major auto giants including General Motors, Ford, Fiat Chrysler, Volkswagen VWAGY, Daimler AG, BMW AG, Toyota TM, and Honda HMC ramped up investments in green vehicles. For instance, General Motors boosted EV investment to $27 billion through 2025. Volkswagen is committed to spending more than $40 million through 2025. Ford has allocated more than $11 billion of investment toward green vehicles and hybrids through 2022.

Tesla (TSLA) Adds Another Feather in its Cap:

One of the trendiest stocks of 2020 was indeed EV king, Tesla. The company finally managed to solidify its spot among blue-chip equities as it joined the illustrious S&P 500 Index this month, marking a major victory for CEO Elon Musk. Musk’s brainchild had once been notorious for overpromising and under-delivering. However, Tesla completely flipped the narrative, with Musk’s seemingly overzealous promises finally being met. Since the start of this insane year, shares of Tesla have rallied a whopping 730%. Even in the face of a global pandemic and economic recession, the company was able to deliver a record number of EVs. The enterprise is looking at a lustrous road ahead with high range vehicles, gigafactories construction, superior technology, and software edge. Tesla currently sports a Zacks Rank #1 (Strong Buy).

SPAC IPO Boom: 

It rained IPOs in the auto market, especially in the EV space, and merger with special purpose acquisition companies (SPACs) turned out to be the most popular IPO route. Capitalizing on the EV mania, many companies like Nikola Corporation, Hyliion Holdings, Lordstown Motors, and Fisker went public this year via SPAC IPO. Other EV names like Lion Electric, Arrival, Canoo Holdings, and ChargePoint announced plans to go public and are set to make their U.S. stock market debut in 2021. Chasing the success of Carvana, a couple of used car e-retailers also decided to go public through SPAC mergers. While Vroom got listed in June, Shift Technologies went public in October. CarLotz is also set to make NASDAQ’s debut after the completion of the SPAC merger in 2021.

What to Expect Going Forward?

The year 2020 was indeed a pivotal one for the auto industry, with companies having chalked out new strategies to survive and thrive. The auto sector gradually managed to turn around from the major turbulences in the first half of the year. Going into 2021, there are reasons for concerns as well as optimism. With the auto sector being highly cyclic in nature, vaccine developments and the coronavirus aid bill are likely to boost the economy, as well as industry prospects. Nonetheless, soaring COVID-19 infections and concerns over new coronavirus variant loom large. While auto sales are expected to improve in the coming year, secular risks remain. Per Fitch Ratings, U.S. light-vehicle sales are forecast at 15.6 million units for 2021, up around 10% from the 2020 projection of 14.2 million. However, Fitch does not anticipate sales to return to 2019 levels until 2022.

Meanwhile, the EV hype and digital trends are only likely to soar in 2021. Among various COVID-induced trends, the digital revolution is likely to transform the automotive market in a big way in the coming years. Automakers’ race to invest vast sums in the e-commerce platform will gather steam and aid businesses to reach new heights, going forward. The e-mobility industry is also expected to witness the massive growth in the coming years. The 2020 decade will be one wherein EV market share may grow exponentially, with prices of green vehicles reaching parity with their fossil fuel-powered counterparts.

Source: U.S. Auto Market 2020 Flashback and Looking Ahead to 2021