U.S. auto sales plateau at 17 million in 2019; slowdown projected for 2020

IRANPOLYMER / BASPAR 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.

On Jan. 29, Ford Motor Co. announced plans to invest $1.45 billion to produce new trucks, SUVs, EVs and autonomous vehicles at two factories in Detroit. The company will invest $750 million and add 2,700 jobs over the next three years at the company’s manufacturing plant in Wayne, MI, where it will build the new Ford Bronco as well as a new Ford Ranger. The deal also includes a modification center to support autonomous vehicles.

An additional $700 million investment will add 300 new jobs at Ford’s manufacturing site in Dearborn, MI, where it will build the new F-150 and F-150 Hybrid as well as an all-electric version of the best selling truck.

According to a report from McKinsey’s Center for Future Mobility, EV adoption is expanding despite early growing pains, with sales growing to more than two million units globally in 2018. That is up 63% on a year-on-year basis, but still represents only a penetration rate of 2.2%, a fraction of the overall light vehicle market. “As EV markets continue their rapid but sometimes unpredictable growth toward mass-market proportions, automakers have begun to experience growing pains in their supply chains and in their bottom-line results,” said the report.

McKinsey also reported that the U.S. market almost doubled the number of EV units sold in 2018 to 360,000 units; 140,000 of those were Tesla’s Model 3 cars.

In 2019, Tesla appears to have finally taken off, as its sales were up 50% to 367,500 deliveries; Model 3 sales were up 47% in Q4.

Strong growth in the EV market will “depend on regulatory developments, given ongoing discussions among federal and national parties regarding the rollback of 2025 fuel-economy standards as well as state authority under the Clean Air Act,” said McKinsey’s report.

Other media reports mention the fact that many countries and even some states (California comes to mind) are pushing legislation to ban internal combustion engine (ICE) vehicles to force people into EVs. I’m not sure how this will fly given the cost of EVs and the fact that currently they are considered a premium vehicle. However, said McKinsey’s report, “Advancements in battery technology, economies of scale in EV production, native EV design and cooperation among OEMs can help bring down costs, which are currently still higher than for comparable ICE vehicles—about $12,000 on average.”

New Mexico incentivizes EV adoption

A news release from Albuquerque-based Southwest Energy Efficiency project (SWEEP) praised New Mexico Governor Lujan-Grisham for prioritizing legislation that would make electric vehicles and plug-in hybrids more affordable for all New Mexicans, especially low-income households. A bill filed in mid-January would accomplish that goal by creating a state income tax credit for the purchase of new electric vehicles.

Bill SB-2, the Electric Vehicle Income Tax Credit, would give buyers of new EVs a $2,500 income tax credit; qualifying low-income households would receive a $5,000 credit, accelerating EV deployment. Supporters of the bill say it would improve air quality, which would improve public health and reduce healthcare costs.

Of the more than 650,000 registered private and commercial automobiles in New Mexico, currently about 1,750 are EVs or plug-in hybrids, according to SWEEP. SB-2 will build on progress the state made last year by adopting HB521, which requires regulated electricity providers, like PNM, to deploy electric vehicle charging infrastructure and help advance the EV market. It will also help lay the groundwork for successful adoption of the Clean Cars Program in New Mexico, which would require auto manufacturers to make more EVs available for purchase at dealerships in the state. Governor Lujan-Grisham states her intention to adopt this important policy by the end of this year.

With ICE vehicles continuing to be the mass-market vehicle of choice, even a minor increase in EVs won’t help improve things for 2020, said McKinsey. At some point the U.S population won’t be large enough to support higher unit sales of light vehicles over the long term.

 

 

source: plastics today