Pub 20-2021-2022 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E 1 | 2 0 2 1 26 new jersey auto retailer 2021 Auto Sales Expected to Reverse Some of the Pandemic-Induced Decline BY JEFF FOLTZ The New Jersey new vehicle market was in good shape at the start of last year. New retail registrations in the state during 2019 approached 520,000 units based on historical standards and were well above average. And 2020 got off to a good start as well, with registrations declining by less than 5% in January and February versus strong year-earlier results. Auto Outlook’s forecast at the time was for sales to drift lower but remain strong. After seven years of increasing registrations following the recessionary low-point in 2009, the market was due for a mild downturn. The projected decline in 2020 new vehicle sales was not expected to be pronounced or prolonged. The market was not overheated at the beginning of the year. The reason for this traces back to the steep decline in sales that occurred during the Great Recession of 2009. Registrations in the state remained below 450,000 units for five consecutive years between 2008 and 2013. Accumulated, pent-up de- mand reached record high levels during this period, and it took until 2019 for all of these delayed purchases to occur. Hence, the forecast for a slight decline with sales remain- ing strong in 2020. The forecast carried with it a common caveat: “barring any unforeseen events …” The COVID-19 pandemic qualified as an “unforeseen event.” New retail, light vehicle registrations in the state fell by 53% in the second quarter of 2020 versus a year earlier, with an unprecedented 85% fall in April. Encouragingly, the market bounced back following the second quarter decline. At the onset of the pandemic last spring, an annual drop of 25+% for 2020 seemed within the realm of possibility, but the market finished the year off 19.6% from 2019. It’s hard to envision a scenario where a double-digit percentage decline in sales can be interpret- ed as good news, but in this case, it was. In the second half of the year, new vehicle registrations were off just 7% from a year earlier, an impressive result during a once-in-a-life- time global health crisis. So, where does the market go from here? Based on the way things look now, sales have nowhere to go but up. Pin- pointing how high the market will go and how long it will take to get there is tricky, but key forecast determinants are resoundingly pointing to a solid rebound in sales. Here are four factors that should pace the recovery: 1. Consumer affordability is strong . Very low-interest rates and elevated used car values have combined to make a new vehicle purchase a viable proposition for many consumers. Increasing household incomes ( resulting from rising wages and government stimulus programs ) have also boosted affordability. However, as