The deadly coronavirus pandemic continues to cast a shadow on the U.S. economy and auto sales, probably through at least the first half of 2021, until vaccines become more widely available, according to a forecast from Cox Automotive.
“We are starting to think things look a little bit tougher for the vehicle market,” said Charlie Chesbrough, Cox Automotive senior economist, in a recent webinar just before Congress passed the latest economic aid package. “We’re seeing vehicle sales under quite a bit of pressure this month.”
In a typical business cycle, it’s a buyer’s market when U.S. auto sales decline, because in a typical business cycle, the auto industry overproduces when sales first start to go down. Inevitably, that forces the automakers to cut prices to move the metal.
But in the current cycle, U.S. auto sales are down for the year, and so are inventories, so it’s still a seller’s market.
Sure, there are lots of year-end sales promotions right now, including a lot of prominently advertised 0% loan offers and “employee pricing for everyone.”
But the trend since last spring has been lower discounts on average, even though inventories have begun to catch up with demand, according to Cox Automotive.
For all of 2020, Cox Automotive now expects U.S. car and truck sales combined to be around 14.3 million, down 16% from 17.1 million in 2019, and the lowest total since 2012. Last year was a record fifth year in a row with U.S. auto sales above 17 million. The all-time record was almost 17.6 million in 2016.
For 2021, Cox Automotive now expects U.S. auto sales of around 15.2 million. That would be an improvement of 6% vs. 2020, but still quite a comedown from 17 million.
“We’re ending this year with the virus really quite rampant,” Chesbrough said. He noted unemployment claims are high, and despite the December discounts, longer-term signs point to entry-level, new-car buyers being priced out of the market.
“This is a situation we’re going to be dealing with, certainly through the first half of next year,” he said. “Once we’re past that, the economy is in a position to have a really gigantic second half next year, and that’s what a lot of people are hanging their hats on.”