How many more vehicles can automakers sell in the United States in 2020? The outlook isn’t bright, given that analysts’ forecasts from various media are projecting a decline of 1% to 2% after a decade-long slog to get to the 17 million mark in 2019. According to one report in the Jan. 4-5 Wall Street Journal (“U.S. Car Sales Hit Brakes in 2019”), “the industry faces potential headwinds in the U.S. in 2020” as dealerships continue to sell off an oversupply of inventory from 2019 by offering steep discounts.
Other potential threats to U.S. vehicle demand include higher sticker prices, which are resulting in consumers “stretching” to meet payments for new vehicles, averaging $39,000 by late 2019, according to J.D. Power. However, most were drawn to new cars by new technology and safety features “as well as a growing affinity for pricier SUVs, which accounted for nearly half of the U.S. market through the first 11 months of 2019,” said the WSJ article, citing J.D. Power.
An AP report noted that Charlie Chesbrough, senior economist at Cox Automotive, expects new-vehicle sales to fall to 16.6 million this year, while Standard & Poors analyst Nishit Madlani predicts 16.4 million “amid a wave of used autos hitting the market and high sticker prices on new cars.” S&P sees a further decline to 16.3 million for the following two years. SUVs and trucks accounted for 69% of U.S. sales last year, and since these vehicles are generally more expensive than cars, they drive up the average sale price.
Proving the popularity of SUVs among U.S. consumers, Toyota just announced an investment of $700 million in a planned expansion of its Princeton, IN, manufacturing plant to boost production of its 2020 Highlander SUV from 383,000 in 2019 to 420,000 in the future.
Also noted in a number of reports was the fact that automakers are betting big on electric vehicles (EVs), investing heavily in a product with sluggish market demand. A report from Thomas Insights cited an early 2019 analysis by Reuters of 29 global automakers that found they are investing at least $300 billion in EV technology over the next 10 years, “with 45% of that earmarked for China.” In November of last year, Volkswagen announced that it plans to break ground on an $800 million plant expansion in Chattanooga, TN, for EV production.
EV sales up 63% year on year
General Motors, which had previously announced its intention to invest heavily in EVs, just announced that it plans a $3 billion investment to refurbish an under-used Detroit factory so it can build a series of electric and self-driving vehicles, eventually employing 2,000 people. Currently, 900 work at the Detroit-Hamtramck facility making the Impala and Cadillac CT6. Renovation of the factory will begin at the end of February, after the plant closes down, and will get upgrades in machinery, conveyors and controls. GM will also invest $800 million in equipment for parts suppliers and other projects related to the new EVs.
GM said that the factory will start building the company’s first electric pickup late in 2021, followed by a self-driving shuttle for GM’s Cruise autonomous vehicle. Reuters reported GM plans to build an electric SUV in 2023, and has plans to “revive the Hummer name” to sell its new line of pickup trucks and SUVs. The company also announced that by 2030, most—if not all—Cadillacs will be EVs.