Borrowers with good credit, which is to say around three-quarters of new-vehicle buyers, appear to be shrugging off the effects of the COVID recession, but the auto sales forecast for 2021 isn’t as simple as that.
On the positive side, tailwinds for auto sales in 2021 include low interest rates, government stimulus checks, and billions of dollars in “pent-up cash” for households with stable, well-paying jobs.
Those prime-rated households haven’t been able to splurge on items like vacations, eating out, and air travel, said Charlie Chesbrough, Cox Automotive senior economist.
“Eventually, this is going to get unleashed into the economy. This money is going to spur a lot of economic activity in the second half of this year,” he said, in a recent webinar hosted by the American International Automobile Dealers Association.
But affordability issues are posing a serious problem to the other one-quarter of the new-car buying public — those with subprime credit, or no established credit.
On average, prices for new trucks and cars have risen sharply in the last several years, Chesbrough said. In 2012, 54% of all models sold in the U.S. market were priced below $30,000. That share was just 24% in 2020, he said.
The consumer shift to light trucks — in particular pickup trucks, SUVs and car-like crossover models — is a big reason for the uptick in average prices.
At the same time, there’s been steep growth in even higher price ranges, he said. For example, cars and trucks priced from $50,000 to $60,000 increased to almost 20% of the market in 2020, up from a percent share in the low single digits in 2012, he said.
Between affordability concerns, the ongoing pandemic, and a persistent shortage of new-vehicle inventory, Chesbrough said Cox Automotive is sticking to a relatively conservative forecast for 2021 U.S. auto sales of about 15.7 million cars and trucks.
“We are a little bit on the conservative side at Cox,” Chesbrough said.
In contrast, General Motors expects 2021 U.S. auto sales in the “mid- to high-16 million” range, said Steve Carlisle, president of GM North America, in a separate conference sponsored by the American Financial Services Association.
U.S. auto sales in 2020 were about 14.6 million, down from about 17.1 million in 2019.
Chesbrough said he continues to be concerned that while the COVID recession of 2020 appears to have been short-lived, the magnitude of the 2020 drop in Gross Domestic Product and the spike in unemployment in 2020 dwarf the so-called Great Recession, which bottomed out in 2009.
He said, “The Great Recession pales in comparison with the magnitude of what we’ve been going through.”
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