Experts forecast 15.5 million new vehicles will be sold in 2021; vehicle affordability will become issue for some consumers, Covid vaccine will keep sales steady and new products hit the market
Santa Monica, Calif.—The car shopping analysts at Edmunds report that the auto industry is on track for greater stability and healthier sales this year, forecasting that 15.5 million new cars will be sold in 2021. Edmunds analysts note that this would represent a 6.5 percent lift compared to last year.
“As 2020 was an incredibly tumultuous year for the industry, there were some unique market conditions that helped retail sales end up in a much stronger place than anticipated, and the good news is that these should serve as some decent tailwinds into 2021,” said Jessica Caldwell, Edmunds’ executive director of insights. “Despite the economic hardships faced by so many Americans during the pandemic, there’s still a large population of well-off consumers who have been taking advantage of favorable financing conditions and sustaining healthy demand in the new car market.”
Edmunds experts put together some of the biggest trends that they predict will shape the road ahead in 2021:
- The new vehicle market will continue to grow more pricey and exclusive as the pandemic drives an income divide among Americans. New car prices are skyrocketing: In December 2020 the average transaction price for a new vehicle hit an all-time record high of $40,573. Edmunds analysts expect this number to go up as affluent consumers benefiting from lower interest rates and healthy stock and housing markets continue buying bigger, more expensive new trucks and SUVs. At the same time, more affordable options in the new car market are growing increasingly scarce as automakers shutter their car lines, which Edmunds experts say will create a barrier to entry for many consumers and force them into the used car market.
- Covid-19 vaccines will help keep auto sales steady but won’t boost them dramatically. Unlike other industries such as airlines or entertainment, automotive sales are not expected to see a dramatic retail lift post widespread vaccination distribution — in 2020, retail sales were down only 8.6 percent. However, Edmunds experts say that a return to an in-person work environment should help maintain sales, and they anticipate a boost in daily rentals in 2021, which generally make up 12 percent of new vehicle sales but sank to 7.4 percent in 2020.
- New products will help breathe life into the automotive industry. The new year will be a standout year for new vehicles. It will see the birth of a brand-new segment in EV pickup trucks, at least seven new electrified SUVs, and some popular off-road nameplate revivals including the Ford Bronco and Jeep Wagoneer.
“It comes down to production cycles and a little bit of luck, but every so often there’s a truly exciting product year for the automotive industry like we’re about to witness in 2021,” Caldwell said. “Between the GMC Hummer, the Tesla Cybertruck, and a debut vehicle from Rivian, the EV pickup truck segment is about to explode and we’re going to see even more electrified SUVs enter the market. And under the new presidential administration, there could be the possibility of new tax credits or incentives for individuals that could finally help move the needle for electric vehicles, which for years have been slow to grow in popularity in the U.S.”
Although 2021 is looking to be an exceptional year for the industry from a product standpoint, Edmunds experts note that there are a number of uncertainties that could negatively affect sales.
“The chip supply shortage could throw a big wrench in production for automakers, which have only just gotten back into a good groove after shutting down during the pandemic,” Caldwell said. “And there is the bigger question about what consumer demand for vehicles is going to look like in a post-vaccine world. Lots of additional wealth and resources have been pushed into new car purchases for now, but people have been cooped up for nearly a year. They might choose to shift their spending to experiences rather than goods, which could be a threat to car purchases.”
More insight into recent auto industry trends can be found in the Edmunds Industry Center at http://www.edmunds.com/industry-center/.