Recently, the Association of Automobile Dealers (NADA) released its 2021 U.S. car sales data and analysis.
For the full year of 2021, U.S. new vehicle sales were 14.93 million units, up 3.1% from 14.47 million units in 2020. The seasonally adjusted annualized sales rate in the U.S. in December 2021 was 12.44 million units, down 23.7% from December 2020.
Auto dealerships' inventory levels at the end of December 2021 were 1.12 million units, up 7.4 percent from the end of November 2021, but down 59.1 percent from 2.75 million units at the end of December 2020.
The average transaction price of new cars is a record high
"The main problem with new car sales in the U.S. in 2021 is inventory constraints, and the coronavirus pandemic and the resulting shortage and production cuts in microchips have severely limited new car and truck inventory at dealers across the country. Constraints have further led to a dampening of new car sales, a shortage of used car inventory and higher vehicle prices. NADA chief economist Patrick Manzi said.
According to J.D.Power, the average number of days in stock of new cars at U.S. dealers fell to 17 days from 49 days a year ago, a record low.
J.D.Power said the average transaction price for a new car reached a record $45,743 in December, the first time ever it exceeded $45,000. Other factors, such as limited OEMs discounts and production prioritization of higher-priced, more demanding vehicles, have contributed to higher car prices.
The average total incentive spend per vehicle at U.S. dealers in December totaled $1,598, a record low for the month and well below $2,291 a year ago.
While the microchip shortage (one of the reasons for the decline in inventories) is slowly improving, the shortage is expected to continue at least until the second quarter of 2022. Auto Forecast Solutions expects global car production to be no more than 11.3 million vehicles per quarter due to chip shortages.
NADA expects U.S. new vehicle sales to reach 15.4 million units in 2022, up 3.4 percent from 2021.
Compared with traditional fuel vehicles, the market share of new energy vehicles is relatively small, but it accounts for 9.5% of new car sales in 2021. Hybrid vehicle sales accounted for 5.4 percent of new vehicle sales, up from 3.1 percent in 2020, while plug-in hybrid vehicle (PHEV) sales accounted for 1.2 percent of all sales in 2021, up from 0.5 percent in 2020.
The market share of pure electric vehicles (BEVs) also continued to increase, accounting for 2.9% of all new car sales in 2021, up from 1.6% in 2020. As new all-electric vehicle products continue to be introduced, BEV's franchised new car dealership sales continue to grow; in 2021, franchisees sold more than 31% of pure electric vehicles in the United States.
Used car trading prices up 19.1% y-o-y
Due to the shortage of chips, new car inventory is limited, and some consumers turn to the used car market. Tight new car inventories have led to a year-round increase in used car prices. As of October 2021, the average used car transaction price at a U.S. franchisee dealer was $25,904, an increase of 19.1% year-over-year.
According to auction company KAR Global, auction prices for used car wholesales at dealerships in December 2021 were 48.1 percent higher than they were in December 2019 before the pandemic and 34.8 percent higher than in December 2020.
The retail price of used cars does not form a reciprocal relationship with the wholesale auction price, but the wholesale auction price reflects the price paid by franchisees, new car dealers and independent used car dealers when purchasing the car source, and the price increase obviously affects the price sold to consumers.
In addition to auctions, dealers also obtain vehicles in the form of replacement of used cars, rental of returned cars, purchase of vehicles directly from consumers, and resale between dealers.
The price increase is due to the shortage of used cars, which also reflects the decline in new car production to some extent. Obviously, the reduction in new car production means that after two years, the supply of used cars with a 2-year age will also decrease. This is the direct impact of the new car market on the used car market, but it is not the only impact. Faced with a shortage of new cars, consumers may delay buying new cars when they can't find the source they want, which means fewer replacements for older vehicles.
Alternatively, consumers planning to buy a new car may go to a used car to find the right replacement for the new car they want, avoiding new car prices that are also at or near record levels. Either outcome would put additional pressure on the supply and demand of used cars.
But on the positive side, the high replacement price of old cars also makes it easier to buy new cars, although new car prices have also risen.
The average wholesale auction price for all used cars in December was $16,026, an increase of $5,204 from December 2019. KAR Global said the average price for used trucks was much higher, at $18,638 in December. That's 44.8% higher than in December 2019.
On average, the absolute price of used cars is lower, but the increase in passenger cars is even greater. The average price of used cars in December was $12,084, up 48.6% from December 2019.
Tom Kontos, chief economist at KAR Global, said wholesale prices fell slightly for months in a row from October to November 2021 and from November to December, falling by less than 1 percent each time. He said used car retail also weakened at the end of the year, but if the supply of used car vehicles is sufficient, retail sales will be stronger.
The impact of inflation on the U.S. auto market
At the macro level, inflation is a major concern for consumers. In November 2021, U.S. inflation, as measured by the Consumer Price Index (CPI), grew 6.8 percent year-over-year, the highest since 1982. The indexes of gasoline, housing, food, used cars and new cars are the biggest contributors, and price levels are expected to remain high at least in the second quarter of 2022.
At the same time, consumers are also feeling the impact of rising prices and fear that their living standards will fall because wage growth will not be enough to mitigate price increases.
Although this sentiment is due to increased inflation, real personal consumption expenditure has surpassed pre-COVID-19 levels since the second quarter of 2021 and increased for the remainder of the year. This paradox may be due to increased spending by high-income households, while low- and middle-income households feel the effects of inflation more directly.
In terms of the labor market, the U.S. unemployment rate fell to 3.9 percent in December 2021.
In November, a record 6.7 million people were hired in the United States, but 4.5 million also quit their jobs. As of the end of November 2021, there were an average of 1.5 job openings per unemployed person. While the average hourly wage of employees in the United States has risen month-on-month, the US job market is still facing multiple challenges such as the epidemic, labor shortage, and high inflation.
The US employment data for the last month of 2021 continues with a "mixed" picture: job growth is much lower than expected, but the unemployment rate continues to fall.
As of the end of October 2021, the number of jobs in licensed new car dealerships in the United States was 1.079 million, basically the same as in previous months; throughout 2021, the number of people employed by franchise dealers hovered about 4% to 5% below the level before the new crown.
"We expect that as new car production picks up and the microchip shortage slowly recovers, the number of people employed at franchise new car dealers will return to levels closer to pre-pandemic levels." Manzi said. In addition, pent-up demand continues to increase, and once the chip shortage passes, it will help to bring sales back to a rapid recovery.
Source: NADA, Forbes