Automakers are Selling Fewer Cars, But Banking Profits

It has definitely been a strange year.

When the pandemic hit, automakers expected sales to fall by 30% or so, and for consumers to demand discounts. How else would we deal with soaring unemployment and falling economic activity? But interesting things happened on the way to a terrible year in the car industry. Supply shrank while demand steadied, which resulted in more profit.

The automakers shut down production for a couple of months, which sapped the system of supply. At the same time, consumers stopped selling their old cars and more consumers chose to buy cars and move further from cities, or simply bought them to use for commuting. Most workers kept their jobs, especially those in professional positions, and the government carried millions of people by sending out unemployment bonus checks.

Overall, auto sales will likely drop from 17 million units last year to 15 million this year, but the tight supply is keeping prices elevated.

On the used car side, prices are up 20% over this time last year.  If you were thinking of trading in your old car, now would be a great time.

 

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