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Monday, 18 January 2021 22:56

Auto Industry ‘In Much Better Place,’ But Price Surge Likely to Continue

Written by Paul A. Eisenstein, The Detroit Bureau
Tesla was one of only three automakers to post an increase in U.S. sales in 2020. Tesla was one of only three automakers to post an increase in U.S. sales in 2020.

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The auto industry appears ready to get off to a good start for the New Year---and could gain even more momentum if the Biden administration moves forward with new stimulus and infrastructure programs, a panel of industry analysts forecast.

The slow growth of the electric vehicle market could be a major beneficiary, demand in 2021 boosted not only by government incentives but also by the flood of new models coming this year, such as the GMC Hummer and Volkswagen ID.4. Ironically, that may not be good for the segment’s leading brand, Tesla, the experts warned during a seminar sponsored by Cox Automotive.

 

“We’re in a much better place than in spring (2020),” said Jonathan Smoke, chief economist for Cox, which services a broad range of automotive operations, from online retailing to used vehicle wholesale auctions. But Smoke and his colleagues cautioned there are still plenty of uncertainties, especially when it comes to the health of the economy in the months to come.

 

Among the uncertainties facing the industry: whether new- and used-vehicle prices will continue to surge, and if that upward trend continues, whether it could start to choke off consumer demand.

 

Noting December was “a very strong month,” Cox Senior Economist Charlie Chesbrough said the pace of sales was the strongest the U.S. market has seen since August 2019, and signals “the market will continue this upward trajectory in 2021. I would say there is more upside potential this year than downside.”

 

In line with several other forecasts, Cox’s official forecast calls for sales to reach 15.7 million for all of 2021, a 9% year-over-year increase.

 

That’s still well below the 17.1 million number from 2019, but the primary reason for the gap is the sharp slump in fleet sales. Those---especially when it comes to daily rentals---likely won’t recover until 2023, Chesbrough cautioned, requiring time for business, as well as tourist, travel to recover from the COVID-19 pandemic.

 

The pandemic caused chaos across the industry last year, and while 2021 begins with the promise of new vaccines, it is yet uncertain how---and how quickly---things will...


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