After being affected by the 2020 pandemic, the Californian car market was resurrected last year with a rebound in sales. But the road ahead remains bumpy as global supply chain disruptions persist, meaning fewer cars and trucks at dealerships mean higher prices for customers.
New vehicle registrations in California totaled 1.86 million in 2021, according to figures released last week by the California New Car Dealers Association. This is an increase of 13.3 percent from the previous year, when sales plummeted following the implementation of COVID-19 restrictions.
In San Diego County, sales increased 16.3 percent.
For perspective, new car and truck registrations topped 2 million a year from 2015 to 2019.
Economists at the New Car Dealers Association forecast this year’s sales to rise 3.8 percent to 1.93 million.
Analysts say the figure would likely be higher, given pent-up demand, but the sector has been hampered by supply problems that have hurt shippers around the world.
The pace of sales growth “certainly isn’t as fast as many of us expected, especially given the persistence of the omicron variant of the virus and chip shortages,” says Brian Maas, president of the New Car Dealers Association. . “It’s just that the availability of the kinds of options that consumers are used to, it’s not there right now.”
Modern vehicles are made up of microchips that are installed in sensors for brakes, power steering, navigation, and entertainment systems.
With the economy virtually on hold at the start of the pandemic, auto sales plummeted. Automakers have cut production of new vehicles and canceled orders for computer chips. But after auto sales rebounded faster than expected in 2020, automakers have struggled to get back to the forefront of the market.
A series of events—including a COVID outbreak at a factory in Malaysia, a drought in Taiwan (water is needed to produce the chips), and a plant fire in Japan—led to a global shortage of microchips, exacerbated by transportation line problems.
As a result, vehicle inventory has shrunk, while consumer demand is as high as it was before the pandemic.
The chip shortage “has really hurt sales and pushed prices up,” said Ivan Drury, research manager at auto-review company Edmunds.com. “It’s like you took this tiny domino, shook it, and it slid down.”
Because of a lack of inventory, it’s hard to buy a new car or truck below the manufacturer’s suggested retail price, or MSRP.
According to data tracked by Edmunds, 80.3 percent of new car purchases in the United States in January were sold above the MSRP. In January 2019, before the pandemic, the figure was just 1 percent.
Median price above MSRP last month was $728, with some models — even non-luxury brands — seeing increases of thousands of dollars.
“There’s this weird dynamic where there are people who are willing to pay a lot more and others who are just looking for something cheap to get by,” explains Drury. “The problem is that there are many people looking for something.”
The dynamic is so pronounced that some new vehicles are being sold without installing some of the less vital microchips, like heated seats or wireless charging.
“What that tells me is how important consumer demand is,” Maas said. “Five years ago, if you said, ‘I’m going to buy a car with no chips,’ you would have said that’s crazy. But in the current environment, people are doing those calculations and deciding if it suits them.”
Maas said inventories could return to pre-pandemic levels by early 2023, but Drury is more pessimistic.
“If you want to go to the dealership and see all the colors, all the options, all the things you can ask for on the car … and you want to see explosive sales of some kind, you better wait two whole years,” Drury said, ” because there is a lot of repressed demand and a lot of replenishment of orders”.
Sales in California in 2021 were a mix of models and categories. The best-selling vehicle was the Toyota Camry, and SUVs like the Toyota RAV4 continue to attract a wide segment of the market.
Sales of low- and zero-emission vehicles continue to rise statewide, with combined hybrid and electric vehicle registrations accounting for 23.4 percent of the market share.
“People are starting to switch to these cars,” Maas said. “I suspect we will see that figure continue to grow, especially as gasoline prices remain high.”
The Tesla Model Y, Elon Musk’s compact SUV, was the second best-selling vehicle in California last year and the Tesla Model 3 finished in fifth place.
Inventory shortages kept the used car market alive in 2021, growing 6.7 percent. Tight supplies made older cars and trucks more attractive, with registrations for vehicles 4 to 6 years old up 21.6 percent from a year earlier and vehicles 7 to 10 years old up 25.2 percent. percent.
The auto market looks very different than it did at the start of the pandemic, when dealers had plenty of vehicles on their property, but too many scared off consumers who were nervous about buying a new car.
“We’ve gone from an incredible supply glut to an incredible supply shortage,” Maas said, “all in the space of 24 months.”
Best Selling Cars in California in 2021
1. Toyota Camry 61 599
2. Tesla Model Y 60 394
3. Honda Civic 59 818
4. Toyota RAV4 59 157
5. Tesla Model 3 53 572
6. Toyota Corolla 48,915
7. Ford F-Series 46 817
8. Chevy Silverado 44 670
9.Honda Accord 44,576
10. Toyota Tacoma 44 484
Source: Experian CNDA/AutoCount data