Cox Automotive Lowers 2021 New Car Sales Forecast 4%

Cox Automotive on Monday lowered its forecast for new car sales to 15.3 million this year, down from 16 million forecast two months ago as the market remains significantly constrained by lack of supply.

A news release from Cox Automotive also said the forecast was lowered 4% because of “the recent news from Ukraine and ongoing inflation issues.”

“To reach this level by year’s end, the supply situation must begin to show significant gains next quarter and consistent improvement throughout the year, otherwise, another forecast adjustment may be necessary,” the news release said.

Cox Automotive estimated 3.3 million new cars and trucks will be sold in the first quarter, down 16% from 2021’s first quarter. It will also “mark the second-worst quarter for new-vehicle sales in a decade, behind only Q2 2020, the height of the global COVID-19 pandemic.”

At credit unions, the relatively slow car market compared with the robust mortgage market has contributed to cars falling from 39% of portfolios at the end 2018, to 32% at the end of 2021.

In January, CUNA found credit unions held $143.4 billion in new car loans, down -0.7% from a year earlier and up 0.7% from the previous month. Used car loans were $268.7 billion on Jan. 31, up 11% from a year earlier and up 1.2% from Dec. 31.

The spring selling season traditionally ramps up in March, but Cox forecast that new cars sold at a seasonally adjusted annual rate of 13.1 million this month, down from 14.1 million in February and 17.6 million in March 2021.

Cox Automotive Senior Economist Charlie Chesbrough said the conditions are right for higher sales with low unemployment and relatively low interest rates. But unadjusted sales volume has been averaging just over 1.06 million vehicles each month since last August.

“Make no mistake, this market is stuck in low gear,” Chesbrough said. “Sales remain weak and will basically be stuck at the current level until more supply arrives.”

In Cox Automotive’s U.S. Auto Sales Forecast and Industry Insights Webcast Monday it also reported:

• Besides the chip shortage, the biggest threats to a sales recovery this year are new COVID-19 variants that might disrupt the economy, higher interest rates that will make cars less affordable and the Ukraine War, which is raising gas prices and makes the supply chain more vulnerable.
• Total used car sales will be 39.3 million this year, down 3% from 2021. Retail sales will fall 2% to 20.7 million.
• The average list price for a used car was $27,398 in March, up 27% from $21,493 a year earlier. The pace of price gains is likely to slow this year.
• In February the average transaction price for a new car rose 11% from a year ago, but it expects the growth rate will taper off after May, the anniversary of the computer chip shortage.
• New car incentives have fallen from about 10% of the Manufacturer’s Suggested Retail Price from early 2019 into the summer of 2020, before plummeting to about 4% in February.
• New car transaction prices have risen from about 96% of MSRP in January 2021 to about 103% in February.
• The average income of a new car buyer was near $124,000 last year. People with income under $75,000 accounted for 35% of new car sales last year, down from nearly 37% in 2020.