Car sales, marketplace, shot at wide angle

Opinion: Predictions For 2021, Auto Sales Improve, Tesla Meets Its Match

By Ed Garsten

A new administration elected to the White House, multiple vaccinations available to help snuff out the Covid-19 pandemic, and a strengthening economy all gave U.S. auto sales enough kick to cross the 2020 finish line with promising momentum. But while that momentum is likely to carry through to this year, Cox Automotive economists predict it won’t be enough to bring the industry back to pre-pandemic levels.

During a presentation recapping 2020 and looking ahead to 2021, the top economists at the global auto services company also noted this year will see important growth in electric vehicle production and sales but a strong challenge to EV maker Tesla’s TSLA +7.8% dominance of the market.

Last year new vehicle sales came in at 14.5 million units—a sharp decline from 2019’s 17 million. Blame that on spring production stoppages and the hit on the economy caused by the Covid-19 pandemic. But the year ended with a strong December with an annualized selling rate of 16.3 million—the best sales month since August 2019, according to Charlie Chesbrough, Cox Automotive Senior Economist.

“Santa did not leave us coal,” said Chesbrough. “All in all it was a nice finish to a very volatile year.”

He gives some of the credit to the arrival of government stimulus checks to consumers and overall optimism surrounding the imminent transition to a new administration.

One bit of irony seen in 2020 that’s likely to continue into this year is the enduring strength of sales of high-end vehicles, particularly full-size pickup trucks and luxury SUVs. The average transaction price of a new vehicle was more than $40,000, but despite the economic challenges presented by the pandemic, sales of vehicles even more expensive—$50,000-$60,000 and higher increased.

“What we know is the customer of new vehicles was just not hit quite as hard in this pandemic as other folks,” said Chesbrough. He noted lower-income consumers who suffered the most in the pandemic “aren’t new vehicle buyers anyway.”

Among winning and losing brands, Fiat, Dodge, Jaguar, and Nissan took the biggest hits mainly due to older products, said Chesbrough, while Tesla saw the most positive growth, mainly on strong sales of its Model Y offsetting lower Model 3 sales.

But looking ahead to how this year is likely to turn out, Nissan should bounce back with the introduction of a new Rogue, and Tesla’s honeymoon is likely to come to an end as it will face a storm of new competition.

“In 2021, EVs in more shapes, sizes, and price points will come on the market,” said Michelle Krebs, Autotrader Executive Analyst. “Dealers are getting on board with EVs and Tesla may face its first significant competitive challenge.”

Cox Automotive Chief Economist Jonathan Smoke predicted new prominence for electric vehicles pronouncing, “electric vehicles will start to take center stage. The industry is going to accelerate down Electric Avenue taking EV sales even higher.”

In general, new vehicle sales are expected to creep up this year with Cox predicting a partial rebound to 15.7 million units. For sure, controlling or ending the Covid-19 pandemic as more people receive vaccinations, and a change of administration are seen as factors contributing to the expected sales rebound, significant challenges remain.

Inventories of the most popular vehicles still remain low, affordability remains tough for the most hard-hit consumers, credit remains tight and the unemployment rate is troubling.

“New jobless claims are persistently high, indication new job losses continue to happen,” said Smoke. “We are in a much better place than the spring or summer, but not out of the woods.”

Indeed while there’s optimism this year will mark an improvement not only for auto sales but the economy in general, Smoke notes, “We aren’t fully recovered and can’t be until Covid is completely controlled.”

 

Source: Predictions For 2021: Auto Sales Improve, Tesla Meets Its Match