CarBevy 2021 Auto Industry Outlook
The year 2020 will undoubtedly be one that no industry forgets in a hurry, and this is especially true for the automotive industry. Germany’s automotive industry body, the Verband der Automobilindustrie (VDA), made a prediction back in July 2020 that worldwide car sales for the 2020 calendar year would shrink by a massive 17 percent. In real numbers, 65.9 million cars are sold in 2020 compared to a much healthier 79.5 million sold in 2019. A Forbes contributor, Neil Winston, even made the somewhat stark prediction that global auto sales will not recover to pre-pandemic highs until 2023.
But what does all this mean for the automotive industry in 2021? In this in-depth blog, this is what we intend to find out. When we’re looking forward to 2021, the best place to start is with a retrospective of the key events and trends that defined this automotive year in 2020.
2020: An Automotive Retrospective
There were many huge events and industry-changing trends that defined the year 2020 for the automotive world. Below are some key trends and events which we think are the most important to consider:
2020 Event 1: The COVID-19 Pandemic
Undoubtedly the largest and most singularly devastating event of the entire year was the global COVID-19 pandemic. With lockdowns becoming the norm, the world suddenly experienced dramatic drops in the numbers of people driving regularly. Sales of new cars were equally subject to this downward trend.
In terms of mileage, it was clear from very early on that the pandemic was having a huge impact. In June 2020, The Detroit Bureau reported that American driving in April 2020 was down 39.8 percent in miles compared to the previous year. As Americans worked from home, and even home-schooled their kids, the need for car travel diminished significantly. The drop in driving mileage in 2020 is only part of a much bigger picture, however, which we will elaborate on more in trends for the coming year.
Drops in sales that we mentioned further above, along with factory closures, massive layoffs, and “fortunate” workers who kept their jobs being put onto short-term contracts, have helped to shake the auto industry to its very core in 2020. If customers aren’t out searching for the best car deals, then every part of the industry is failing.
2020 Event 2: Future Bans on Internal Combustion Engines
Another key event in 2020 was the growing momentum behind proposals to phase out gasoline, diesel, and hybrid cars in the coming two decades. In 2019, the states of Massachusetts and New Hampshire and the District of Columbia introduced legislation to require new vehicles to be zero-emission from some time in the next 20 years.
Moving into 2020, this momentum has continued around the United States, with New Jersey, New York, California, Washington, Colorado and Hawaii all introducing similar bills, with the earliest targets set by Washington, which is aiming for all 2030-model-year vehicles (passenger and light duty) to be electric. These states are also now in line with many countries around the world where the same kinds of targets have been laid out: Austria, Belgium, Canada, Costa Rica, Denmark, Egypt, France, Iceland, India, Ireland, Israel, Japan, the Netherlands, Norway, the United Kingdom, and others.
2020 Trend 1: Digitalizing Car Sales
The pandemic may have forced the hands of the world’s drivers when browsing for new cars online instead of at the dealership, but it’s part of a more significant global trend. Gone are the days when people search “car dealership near me” and heading to where the pin drops. In 2020, the dealership has been severely diminished in its sales role, with many regarding it as a pickup station rather than a serious sales location. Global overall sales may be down, but online platforms like Carvana are reporting huge boosts. Their press release for Q3 2020 shows 64,414 units sold, a 39 percent increase from 2019, and a gross profit of $261.3 million, up 90 percent from the same time in 2019.
2020 Trend 2: More Electric Models
Remember when the only electric models you’d heard of were the Toyota Prius Hybrid and Tesla? Well, 2020 was a year in which many others jumped on the bandwagon. Of course, there were more than just hybrids and Tesla before 2020. The Nissan Leaf, for example, has been around for quite some time already. First-timers in 2020 included the Aston Martin Rapide E, Bollinger B1, Mercedes-Benz EQC, Mini Electric, the Porsche Taycan, and more. Other more established companies like Tesla, Nissan, Kia, Audi, and others have also released updated or refreshed versions of older models.
2020 Trend 3: Assisted Driving
While there was undoubtedly a lot of talk surrounding autonomous driving in 2020, the technology is still quite far away from becoming a real and far-reaching global trend. In 2020, however, the increasing standardization of driver assistance technology — known as ADAS or Advanced Driver Assistance Systems — has become key. A report from 2019 by AAA found that 92.7 percent of new vehicles available in the US from May 2018 had at least one ADAS feature available. What started as high-tech features for high-end cars are now commonplace in 2020. It’s getting to the point where we have to ask: will anyone have to park their own car in 2021?
Implications of the 2020 Events/Trends
These trends and others that have helped shape this unique year of 2020 have profound and far-reaching implications for 2021. They are also helping to shape how manufacturers and vendors are adapting and operating in the new climate. Events and trends from 2020 even stretch their influence to related sectors such as financing, insurance, leasing, and more.
Impact on 2021
With Pfizer and BioNTech vaccines being rolled out as we speak, it can be expected that the presence of COVID-19 as a public health threat will continue to diminish through 2021, making it less and less of a direct factor in how things are going. How will the other effects of the pandemic and new policies and commercial trends impact the automotive industry in 2021?
First of all, the sharp drop in mileage, as we touched on above while being a direct result of people being in lockdown, working and schooling from home, is also part of a more significant overall trend. The downward trend in mileage was visible even in 2019 and earlier. Bloomberg Businessweek showed evidence to prove that after a peak in annual mileage of 13,290 miles in June 2005, the general trend has been downwards, with the low point coming in March 2013 where it dropped to 12,110 miles each year. It has shown no signs of returning to higher levels. When you factor in the many changes that have resulted from the COVID year of 2020, the writer of the Bloomberg article we mentioned, Justin Fox, predicts that the change will be permanent going into 2021 and beyond.
Vehicle Miles Traveled Per Capita in the U.S.
Second, despite an apparent drop in mileage, car sales numbers are predicted to recover, perhaps reaching their pre-pandemic levels in 2023. Then, the real question doesn’t seem to be whether the numbers will recover or not, but rather via which channels with the sales happen. More on that below.
Third, the impact of more significant government intervention on phasing out internal-combustion engines can only mean that 2021 will continue to be the year where more all-electric cars are announced. We already learned about new releases during 2020, such as the GMC Electric Hummer, which goes on sale in fall 2021, along with 74 other models returning and new, up from 59 models in 2020. We can expect lots of new announcements for 2022 and beyond.
Overall, it seems that 2021 is to be the year of reduced mileage, increased electrification, and, finally, increased online sales arenas. The online car experience is evolving from straight sales to a whole other animal. With innovative platforms like San Diego’s carbevy.com, more control and convenience are being put into car buyers’ hands. CarBevy allows buyers to state what car they want and what they wish to pay before casting out a line to a network of dealerships and seeing who “bites”. If they do, then you get everything you want without the pain of negotiations and sales techniques.
Implications on Manufacturers and Vendors
As we have stated above, manufacturers will surely respond to the events of 2020 by throwing more of their weight behind electric vehicles of one sort or another. As Toyota has been doing, it may start with increased offerings in hybrid form to allow more people to adjust to electrified cars before going full electric. It will be no surprise to see certain low-selling gasoline/diesel models start to disappear permanently from 2021.
The main challenge for vendors seems to be how to adapt to the world of online car sales. As it is in 2020, buying a car is still not quite like buying a car on Amazon, though it’s getting closer than you think. British start-up, Cazoo, offered a massive shake-up to used car sales by genuinely making it run like an Amazon for cars. You buy your model online, it gets delivered in a big truck, and if you don’t like it, you can return it within a fixed period. They even take away your old car as part-exchange, if you have one.
Such service must have the bricks-and-mortar dealerships worried, perhaps not yet for newer cars, but certainly for their used car stock. Besides these new concepts, however, vendors also have to deal with their on-site workforce, in particular salespeople. In 2021, should the trend of online services such as CarBevy increase, what would a dealership need a full-time sales force for? More and more customers will be coming in merely looking to either confirm or turn down their car offer.
Impact on Related Sectors
Auto insurers and financers could be in for a bumper year in 2021. With a growing desire for flexibility in payments from the younger (but increasingly powerful) generation of car buyers, the opportunities in the new year for lenders to sell finance arrangements and insurance policies are seemingly endless. Part of convenience is being able to get everything in one place. That means there’s great scope for insurers and finance companies to collaborate directly with car-selling platforms and get their deals out to this new generation of customers.
However, for leasing, it’s harder to tell how well they will do in 2021. One thing that has been happening is a considerable increase in price compared to back in 2015-2016 when leasing seemed to be taking off in the US. The year 2019 saw a generation of leasers start to return their vehicles to get the latest version of the same car, or even something else. In any event, they were shocked to find that prices had risen sharply, by as much as 26 percent according to news from Edmunds and reported on PR Newswire.
Automotive Predictions for 2021
With all this in mind, below are making several important predictions for the automotive industry in 2021.
1. A Major Green Shift
A major recent poll conducted for LendEDU, a student loan marketplace, found many interesting things about millennials (those born from around 1983 to 1996) and their attitudes to vehicles. Among the most exciting statistics found was that 50.10 percent of car-owning millennials said they would prefer to buy a “green” car over a traditional one. If this doesn’t give car makers in 2021 pause for thought, then what will? Further to that, 33.53 percent of the same group say they see their car as a kind of status symbol. In the modern age, being green and eco-friendly is a status definer, which means automakers have to take such things seriously. You can expect cars across the board to get greener faster than ever, with multiple announcements in 2021 for new all-electric models with zero emissions.
Millenial Car Owners that Prefer Green Cars
2. Connectivity and Analytics
Technology everywhere is advancing at an ungodly pace, and the automotive sector is no exception. In 2020, more than 70 percent of all cars build had a direct connection to their OEM dealer, other cars, or the city they were in. The resulting wealth of data that now flows between cars and their producers is a game-changer in the industry. Companies will be able to track their models’ performance in -time, making them able to identify or even predict the cars’ problems. It will continue a focus and direction for enhancing cars in the future and preventing the sale of problem cars in the present. We can surely expect this profitable and promising insight-generating technology to expand in 2021.
This brings us neatly to the next point.
3. Growth of the Aftermarket
The level of systems development required for automakers to fulfill their car connectivity ambitions could go beyond any current or even potential capability. Predictably, many car producers will turn to third parties to develop these technologies. This gives rise to a vast potential for growth in the automotive aftermarket in 2021. Additional parts, accessories, kits, and other gear become available to facilitate, enhance, or even personalize the connectivity and other features we described above.
4. Variety in the EV Market
As we mentioned above, the total number of EV models available in the US in 2021 is set to increase to 75, up from 59 in 2020. It’s good news for those looking to buy a new car in 2021. Variety can only increase moving forward, with more electric vehicles in terms of both brand and form. Already it has been predicted that in the coming decade, Tesla’s market share and dominance of the field and even the imagination of the EV sector will diminish. Statistics published on evadoption.com suggest that between 2021 and 2025, Tesla’s market share will fall from 54.2 percent entering 2021 to about 24 percent in 2025. After that, it stabilizes, but it strongly suggests that Tesla is about to face an avalanche of competition; otherwise, how else could they see such dramatic declines in market share?
Projected Total Number of EV Models in the US
5. New Repair Technology
Finally, it is not just ADAS that will continue its expansion into 2021, but other innovative technologies, too. One such technology is collision repair diagnostics. Mitchell Diagnostics revealed in 2020 that an average post-collision scan reveals seven diagnostic trouble codes (DTCs), meaning that repair shops will have to rely more on pre-and post-repair scans to ensure vehicles are properly repaired to full working order. This is a good-news prediction for just about all parties. As drivers, it means the repair standards of our cars is likely to be higher. For insurers, it means that they can be surer of a repair job’s efficacy and offer more competitive rates. For the repairers, too, it makes each job that much more efficient.
What Can We Make of All This?
The automotive industry is so large and complex, and surrounded by a cloud of interconnected industries that depend on it: financing, insurance, aftermarket parts and more. It’s hard to know exactly where such a large beast of an industry will go next, but any reasonable analyst would likely agree that there’s more than sufficient evidence to back up these trends going into 2021.
In our view, the most undeniable is that regarding electrification and the expansion of technology application within vehicles. Greater numbers of ADAS features as standard to make cars safer; a more extensive selection of all-electric options; vast expansion of the aftermarket sector to meet the demand for new connectivity technology, as well as accessories and charging tools: all these seem infinitely reasonable as happening quite quickly from 2021.
Where we are a little more skeptical, however, is on the future of the dealership. Doubtless, there was always going to be an inevitable surge in demand and appreciation for online services in times of public health concerns. However, vehicles are still, for the vast majority of buyers, a purchase that has to be seen, touched, smelled, and tested on the road. During this time, the dealership salesperson still has ample opportunity to apply their trade.
In the longer term, however, we see the role of dealership sales staff as changing, and an overall reduction in numbers of sales staff employed. Companies like BMW and Tesla are both now pursuing systems where their sales staff are developed into “Experts” (or “Advisers” as Tesla calls them), where the focus isn’t just sales, but aftersales care, information, and even teaching their customers about their new cars.
To sum up, 2021 promises to be an exciting year. Even as the COVID-19 virus fades from view, its influence on sales, marketing, and car development will be felt for many years to come. It could well be that the post-COVID has become accustomed to doing more things from home, so the need for cars naturally diminishes. On the other hand, diminishing demand for cars in commuting doesn’t mean it can’t increase in other areas, such as recreation and vacationing. People will still be looking for the best car deals, but perhaps just not on the same types of car as before.
CarBevy aims to be an instrumental force in shifting the world of car sales in the US and beyond. We are dedicated to helping people get the best car deals and change everyone’s buying experience to get the most efficient experience. “Cheap cars for sale” is set to be more of a reality than ever with models like that of CarBevy, which put the price point firmly back into your hands. CarBevy works by first receiving your offer then contacting our trusted local car dealerships to take care of everything else. Visit the CarBevy homepage to learn more.