The pandemic isn’t over. But a good chunk of the United States is returning to normal, and at some point, the pandemic will peter out in the rest of the world.
How long that takes is anyone’s guess. And beyond the pay grade of anyone who contributes words to this hallowed site. But we can hazard a guess as to how post-pandemic car sales, perhaps with some assistance from an analyst.
We’ve already covered the insanity of new- and used-car prices, but we want to look a bit further ahead. Which, given how the pandemic has messed with the economy, will be difficult.
I was once an analyst myself, and forecasting sales was difficult enough in “normal” times. It’s obviously going to be harder now.
Let’s take a look at what’s happening in the wider world. There’s a labor shortage, especially in lower-paying service jobs. Whether that’s because folks would rather sit home and collect stimulus and employment checks or because service jobs are difficult and pay too little and put workers at risk of exposure to COVID and workers just said “screw it, I’m not doing that job again, unless maybe the pay is much better” depends on one’s perspective (and in some cases, politics). Reports seem to suggest the latter is closer to the truth.
If people aren’t working, can they still afford cars, new or used? Does government stimulus money pay enough for an automobile and all the associated costs (gas, insurance, etc)? Does a low-paying retail/service job, for that matter?
Not to mention that a shortage of labor could cause some businesses to close, which would have a negative financial impact on owners and landlords.
What about migration patterns? I’ve heard anecdotes and read reports about people feeling the cities, at least temporarily, to avoid the virus/be closer to family/live in a cheaper place now that they no longer need to commute to work.
Related to that — it seems likely there will be a shift to remote work, though how big a shift remains to be seen. There seems to be a push/pull between old-school managers who want their employees in the office where they can see them and workers who feel more productive at home, happier without commutes, and glad to have more flexibility.
Obviously, a large shift to remote work would impact the auto industry. Some folks, especially those in large cities with easily accessible public transit, would go car-free. Other people would simply put fewer miles on their car and perhaps buy a new car less often (they’d end up servicing their vehicles less often, to0). Maybe the well-heeled remote worker would trade in the sedan that’s comfortable for commuting for something more fun for weekend drives.
On the other hand, there may be pent-up demand. Those who didn’t urgently need a new car may have stayed away from the dealership during the height of the pandemic, preferring to avoid going to too many public places. Now, those same folks may be vaccinated and ready to shop, especially if they got stimulus money and didn’t need to spend it on necessities.
The post-pandemic car world won’t just be shaped by how society emerges from COVID. Things don’t happen in a vacuum. The auto industry hasn’t just been hampered by COVID-related production shutdowns but also by a semiconductor-chip shortage. Yours truly was driving around a dealership-heavy part of his hometown in Chicago’s suburbs recently and saw, for perhaps the first time ever, empty parking spaces where new cars would normally sit. Supply is tight right now.
Then again, COVID and the chip shortage/tight supply could be short-term challenges that will disappear in the next year or two.
Ed Kim, vice president of industry analysis at AutoPacific, thinks so.
“For 2021, we are forecasting about 16.5 million sales, a marked improvement over 2020’s 14.6 million sales that represented a severe drop due to the pandemic from 2019’s 17.1 million sales,” Kim said. “If not for materials-related shortages, most notably the semiconductor chip shortage, 2021 sales would be significantly higher as a combination of tax refunds, stimulus money, and the weakening of the pandemic mean that many people have money to spend and places to go.”
“AutoPacific expects that it won’t be into early into next year that volumes really recover from the chip shortage, and there are other raw materials shortages that have the potential to cause trouble such as a potential looming rubber shortage that could affect tire production,” Kim added. “In 2022, we are expecting sales to recover to about the 16.8-16.9 million unit range, possibly even hitting an even 17 million units, which would effectively match the pre-pandemic year of 2019. We expect sales to remain fairly stable in the 17 million unit range for the next few years thereafter.”
Those with long-enough memories will note that 16 million units a year was about where the industry was at before the Great Recession. Sunny days may yet lie ahead.
[Image: Mikbiz/Shutterstock.com]
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