Economic headwinds combined with ongoing supply chain constraints led to a 16.1% decline in sales of new cars and trucks in California in the first three quarters of this year compared to the same period in 2021.
The California New Car Dealers Association estimates that by the end of the year, sales will be down 9.7 from last year, lowering its projections to 1.68 million registrations for the whole of 2022. That’s within earshot of the 1.64 million registered registrations in 2020 with COVID -19 lockdowns sweeping the auto industry in California and across the country.
Before the pandemic, the Golden State’s new vehicle market was booming, with more than 2 million cars and trucks sold each year from 2015 to 2019.
“I think what’s happening is very much a reflection of all the macroeconomic stuff that’s going on,” said Brian Maas, president of the California New Car Dealers Association.
California actually does slightly worse than the nation as a whole. US registrations fell 13.3% in the first three quarters.
Best Selling Vehicles in California
Since the beginning of the year, until September 2022
1. Tesla Model Y 61 544
2. Tesla Model 3 56 851
3.Toyota RAV4 44 738
4.Toyota Camry 40 358
5. Toyota Corolla 32 216
6.Chevrolet Silverado 29543
7. Ford F-Series 29 055
8.Toyota Tacoma 28 342
9. Honda Accord 23933
10.Honda Civic 23 723
Source: California New Car Dealers Association, Experian
Inflation is eating away at consumers’ disposable income and rising interest rates have made it more expensive to finance the purchase of a new car. The once-common view of car dealerships offering zero percent loans is gone; now, the rates fluctuate between 3 and 7%, or even more.
Another factor? The average price of a new car in September hit an all-time high of $45,000.
“If you’re financing a car and you’re looking at $45,000 and a 6% interest rate, you’re talking about a good interest of $7,000 to $9,000, depending on the down payment and other factors. “said Ivan Drury, senior director of auto insights. on Edmunds.com. “So it’s not some money.”
Meanwhile, automakers are grappling with an 18-month global shortage of semiconductor microchips, leaving dealership lots nearly empty. Silicon chips essential for laptops, game consoles and televisions also go into brake sensors, power steering, navigation and entertainment systems in modern vehicles.
China and other Asian countries that produce microchips have been hampered by persistent COVID-19 outbreaks, and the Chinese government’s zero-COVID policy has tightened supplies.
There are signs the shortage may be easing, but Maas said automakers have told California dealers supplies won’t return to “a more or less normal production environment” until the second half of 2023 or later. the beginning of 2024.
“You put all of that together, it’s no surprise that sales are going down,” Maas said. “I think what’s frankly incredible is that they’re not going down any further. And that shows just how robust the demand for new vehicles is in California.”
On the positive side, demand for electric and hybrid vehicles continues to accelerate.
Tesla not only had the best-selling vehicle in California for the first three quarters of this year, but it also boasted the second-best. The Model Y, Tesla’s entry into the SUV market, saw 61,544 deliveries and the Tesla Model 3 racked up 56,851 registrations, overtaking the Toyota RAV4 which finished in third place with 44,738 units sold.
“It’s more than remarkable; I don’t even know what to call it,” Drury said. “It would be supernatural for other states.”
As gasoline prices hit record highs this year, electric vehicles, hybrids and plug-in hybrids combined to account for 29.9% of the market share of new vehicles sold in California so far. in September.
Governor Gavin Newsom instituted an executive order prohibiting the sale of new gasoline-powered vehicles in California by 2035. Earlier this year, the California Air Resources Board instituted target dates starting in 2026 that increase with increasing percentages until until the 100% target is achieved. .
After reviewing the third quarter numbers, Drury believes the target will be met.
“We have so many people (in California) buying electrified drives, it’s such a J-shaped growth curve,” he said. “I think if things continue as planned, if the infrastructure is built properly for people who live in multifamily housing, condos, apartments, in terms of the charging network, if it’s there, it will happen – maybe before program.”
Used car sales fell 13.1% statewide, compared to the first three quarters of last year. This may be largely due to the fact that used cars cost more. Since there are so few new cars in dealership showrooms, many customers have switched to buying low-mileage used cars, which has driven prices up.
And with fears of a looming recession, customers may be inclined to hold on to the cars and trucks they already drive until the economy improves.
“There are a lot of people who just won’t buy at these prices, but they’re waiting,” Drury said. “The demand is there. If (the dealers) can get the cars, they will sell them.