US car market set to turn corner in 2021

Things are looking up for the US auto sector. Economists from the University of Michigan say the rebound in sales after the 2020 pandemic slump has created enough momentum to drive an ongoing upturn through 2021 and beyond.

Specialist Daniel Manaenkov, presenting at the university’s annual economic outlook, predicted light vehicle sales of 15.6 million in 2021, up about 10% from 2020’s estimated sales of 14.2 million.

According to ratings agency Fitch, although most US carmakers it rates have negative outlooks, the economy overall is expected to improve in 2021, making downgrades unlikely. While projected sales are still about 8% below 2019 figures, it expects sales to return to pre-pandemic levels in 2022, hitting a high of 16.7 million.

Nevertheless, manufacturers will face pressure from another direction: the worldwide crackdown on emissions means they’ll need to start churning out electric vehicles at scale, despite the costs.

According to an article on Cleantechnica, US EV sales are slated to soar by 70% year on year in 2021. The success of the Tesla Model 3 is the main driver of this explosion, but the Tesla Model Y and over 20 new EV models will challenge its dominance this year. Cleantechnica predicts Tesla’s share of EV sales will fall from 65% to 54%.

Among the big-name carmakers developing EVs are General Motors, Nissan, Ford, Daimler, Renault, Volvo and Volkswagen.

Automated driving technologies will also see big investment from both manufacturers and suppliers, although the pace of development is likely to be slower than expected thanks to regulatory, technical and social issues.

The pandemic also continues to threaten supply chains, with an outbreak in Mexico forcing General Motors to cancel shifts.

On the upside, interest rates are expected to remain low for the foreseeable future, enabling borrowing to sustain private investment.

A surprise boom in housing starts, which hit the highest levels since 2006 in 2020, is also having a positive impact. Housing starts tend to correlate with sales of light-duty pickup trucks, and this held true in 2020, with truck sales booming despite the decline in agriculture. Both are likely to remain high, so the prediction is that the US vehicle market will keep on trucking.