ALG now projects the year will finish at around 14.5 million sales, driven back up largely by activity on the more-lucrative retail side, with higher transaction prices and only relatively modest incentive growth.Also helping to bring the numbers back: the rapid rise of online retailing.
The notion of selling cars online had been discussed since the early days of the internet. But when the pandemic hit, it was still little more than a theoretical construct for many dealers. That suddenly changed this year when retailers weren't allowed to have customers in the showrooms.
"Those types of innovations really shored up the possibility for customers to purchase vehicles without the concern of, you know, coronavirus and exposure," said Eric Lyman, ALG's chief industry analyst.
Peculiarities of the initial recovery also worked in favor of the auto industry. A so-called K-shaped recovery benefits certain segments while others suffer. Auto makers and their suppliers figured out how to operate factories within the bounds of coronavirus protocols, and dealers implemented or upgraded digital retailing and remote service while many worked from home.
Just as important: They had customers. Affluent buyers of new and nearly new vehicles were hurt less, in general, than the rest of the population. So while unemployment jumped to levels that typically crush auto demand, Lyman said, "the customers that purchase those [new and late-model] vehicles were less impacted than some of the lower-income workers."
Heartened by a booming stock market, supplemented by stimulus payments and flush from spending less on vacations and entertainment, new-vehicle shoppers had enough available discretionary income that retail sales topped last year's totals in August and September. And those in the market used incentives to opt for better-equipped models at higher prices. In that environment, luxury brands such as Tesla and Lamborghini thrived during the year.
With new coronavirus infection cases soaring past 100,000 a day, the risks of retail shutdowns and manufacturing short- comings are still very real, especially over the next six to nine months. But after that, ALG projects "a period of exceptional growth in the next few years coming out of the recession," said Kristen Lanzavecchia, senior manager for industry insights.
That should benefit industry residual values as the market moves back toward normal volumes from fleet customers as well as retail shoppers.
The future is still unclear. From a big-picture perspective, there certainly are some commuters whose need for a vehicle has been significantly reduced with the rise of working from home and "the Zoom revolution."
But as workers question the long-term need to work in an inner-city office, more are moving to the suburbs, where personal vehicles are a must. And more families are opting for road trip vacations instead of flying, which puts greater priority on a comfortable vehicle, even if it's rarely used.