The U.S. auto industry enjoyed five consecutive years of selling more than 17 million vehicles annually, setting new records and, for the past two years, defying the predictions of analysts and executives alike.
Analysts and executives alike are universally predicting – as they did for 2018 and 2019 – that the industry will move about 16.5 million to 16.7 million vehicles in 2020.
Well, most everyone that is. The experts at Edmunds are bucking the trend, forecasting 2020 new vehicle sales in the U.S. will come in at 17.1 million units, mimicking last year’s results.
“The auto industry has some decent tailwinds heading into 2020: Strong economic factors such as low unemployment and high consumer confidence are carrying over from last year, finance rates are expected to remain relatively stable, and this is a presidential election year, which historically tends to correspond with a year-over-year lift in new vehicle sales,” said Jessica Caldwell, executive director of industry insights at Edmunds.
Although new vehicle sales are expected to be in a healthy place this year, Edmunds analysts note that rising prices present some roadblocks for the industry. According to Edmunds data, the average transaction price (ATP) for a new vehicle in 2019 climbed to an all-time record of $37,183, and prices are only expected to keep rising.
“Prices are shooting up because shoppers are opting for pricey SUVs and trucks packed with more high-tech options than ever before,” said Caldwell.
“These increased costs, combined with the discontinuation of more affordable options like domestic passenger cars, could prompt shoppers to shift their focus to the used market — or delay their purchase altogether.”
Those increased costs have U.S. dealers concerned about this year’s results, according to a new report from the National Automobile Dealers Association’s monthly sales report. NADA anticipates new-vehicle sales of 16.8 million units – a 1 to 2% decrease from 2019. The combination of affordability concerns and high used-vehicle inventories means the used vehicle market continues to pull customers away from the new-vehicle market.
“Consumers are feeling confident in the economy. Interest rates are low. Unemployment is low,” said NADA chief economist Patrick Manzi. “In the U.S. economy, things look really good and I’m confident we will have another solid year in 2020.
“As affordability remains a challenge, more consumers chose used vehicles in 2019. New cars are getting too expensive for many consumers. Even consumers with great credit or the ability to buy new are instead choosing a used vehicle.”
Edmunds isn’t necessarily suggesting it will be a banner year across the board for all segments of the industry either, predicting that market share for passenger vehicles will drop to 24% in 2020, which will translate to fewer cars sold than at the bottom of the recession.
Naturally, trucks and SUVs will benefit from that continuing shift away from sedans. However, they also estimate that hybrid vehicles will grow by 18% in 2020, pushing the green car market to a record market share of 4.8%, compared to 4.3% in 2019.