Automobile Sales Predicted to Decline in Upcoming Years

By Thomas Price Monday, August 31, 2020

According to a recent report, due to the ongoing pandemic and other contributing factors, US motor vehicle sales are predicted to decrease in value by 23% in 2020 and decrease in unit sales by 22%. This drop in sales and the reasons behind it have led to Freedonia Focus Reports to forecast minimal annual declines of the same nature through 2024. Of the many reasons why this is the case, along with the pandemic, other trends include the retiring of the baby boomer generation, the decrease in younger people acquiring driver’s licenses, increases in US urban populations, and the increased reliability of cars and used cars.

In 2018, the US auto industry was responsible for nearly 3% of the US Gross Domestic Product. This translates to 545.4 billion dollars when combining manufacturing and retail sales of automobiles.

In comparison to 2019, where automakers sold over 17 million domestic, light-duty vehicles, the forecast for yearly sales as of August 2020 is around 14.9 million, a drop off of over two million sold vehicles. Some projections put the number at 14.5 million under a worst-case scenario concerning the COVID-19 response. While the obvious struggles with maintaining sales during the pandemic are apparent, the contributing factors may be more permanent and lasting.

The first of these is the ongoing retirement of the baby boomer generation, decreasing the number of people within that generation that would either need a car to commute to work in or would have an income large enough to be used to purchase a new vehicle. As of April 2019, 47% of people born between 1946 and 1964 are already in retirement, with that number certainly being higher in 2020. This number is only going to increase within the coming years.

The decrease in younger people acquiring licenses early is another major factor. In 2014, just 26.5% of people aged 16 had a driver’s license — a stark decrease from 1983, where nearly half of all 16-year-olds had one. This trend continued for 19-year-olds where at the time, 69% of them had a license in comparison to 87.3% in 1983. This is a significant number, especially considering that those just entering into the driving population would most likely not have a car of their own yet.

The population increase in urban areas is yet another contributing factor behind decreased sales. The urban population in the US grew by 72% in 2019, while the US rural population decreased by 67% in the same year. This affects sales due to the robust availability and usage of public transportation in major densely populated cities. In New York City, the percentage of commuters who take public transportation instead of cars or other means of travel sits at a whopping 56.5%. Conversely, rural populations rely much more heavily on owning and using a vehicle.

Yet another major trend is the increase in dependability in cars. In 2020, JD Power released a report on three-year-old cars showing that the overall dependability of vehicles has increased by 1.5% from 2019. This increase in reliability has been the trend for the last several years of the study as well.

So, with the combination of all these different factors — along with the obvious problems that COVID-19 causes — the projections for decreased sales for motor vehicles seem realistic rather than pessimistic. This could result in millions of dollars less in revenue for the American automotive industry within the next few years. And given the long term nature of many of these trends, it could be entirely possible that American auto sales never break 17 million units in a year ever again.

What this does is open the door for the increase in research and investment in electric vehicles, which could be the gateway to new sales. The growth within this section of the industry could lead to an estimated 30% of all new sales being electric vehicles by 2025. Following this estimate, the trend toward electric vehicles could result in the majority of all cars on the road being either fully electric or hybrid by 2030 as opposed to traditional internal combustion engines, according to JP Morgan.

About the Author

Thomas Price

Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.

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