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 27 new jersey auto retailer W W W . N J C A R . O R G the pandemic has lingered, many households have used in- creasing incomes to build their savings rather than increase spending. Consequently, the savings rate has reached levels not seen in over 20 years. When COVID is less of a concern and the economy re-opens, many economists anticipate a surge in spending, which will include the purchase of new vehicles. Finally, some analysts have raised concerns about rising vehicle transaction prices as a negative for afford- ability, but that’s more a symptom of consumers leveraging strong affordability to purchase more expensive vehicles that offer features and equipment that they desire. 2. Pent-up demand has returned . New vehicle registrations in New Jersey during 2020 were about 90,000 units below expected levels, and this year’s total will also be lower than anticipated. These postponed purchases will occur in the future and boost sales this year and in 2022. 3. Employment will be increasing . Total employment in the state at the end of 2020 was down 7% versus a year earlier. As the year progresses, the lifting of business restrictions will allow many New Jersey residents to return to work. Also, the expected rebound in retail spending will fuel employment gains. But the return to full employment could take a while. Most economists expect the labor market’s recovery to proceed at a slower pace than the general econ- omy. By the end of 2022, the expectation is that the labor market could be nearing full employment. 4. The impetus for vehicle ownership has been given a boost due to the virus . The ability to go where you want, when you want, in your own “personal space” are unique attributes of private vehicle ownership, and the virus has firmly estab- lished these virtues in the minds of many vehicle shoppers. The news is not entirely positive, but most of the negatives are related to vehicle supplies, not consumer demand. Factories were just starting to get back to full production by the end of 2020, and then the chip shortage caused slowdowns and factory closures during the past few months. Inventories are predicted to remain relatively lean until at least the end of the third quar- ter, which will put a lid on how high the market can go. Auto Outlook’s latest 2021 projection is for the state market to recover about 1/3 of the lost sales in 2020 . That would put this year’s total at around 460,000 units, a 10% improvement over 2020. The two salient factors that will dictate the sales recovery pace are the progress in vanquishing the virus and how long it takes for the labor market to return to full employment. If COVID is a non-factor by early next year and total employ- ment in the state has returned to pre-pandemic levels, new vehicle registrations in 2022 could approach the total in 2019, with further improvement likely in 2023. Jeff Foltz is the owner and editor of Auto Outlook, Inc., a data analytics company focused on the automotive retail industry. He can be reached at 610.640.1233 or, via email, at jfoltz@autooutlook.com . 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 est 2022est Regs. 485757 419268 352920 399001 419420 440965 480098 481231 509452 534644 508996 515728 519846 418007 459500 500000 Historical data source: AutoCount data from Experian. Forecast projections: Auto Outlook New retail light vehicle registrations 0 2000000 1000000 3000000 4000000 5000000 6000000