covering second quarter 2020 volume 18, number 3 silicon

Covering Second Quarter 2020 Volume 18, Number 3

Silicon Valley Auto OutlookComprehensive information on the Santa Clara County new vehicle market

SPECIAL REPORT

Sales Low Point Likely Reached; Here’s What Recovery Looks Like

Recovery may be uneven, but trend is positive - Here are three reasons why:

1. 1. Vehicle affordability is improving. The Federal Reserve has practically guaranteed that interest rates will be near zero for at least two years. In addition, the manufacturers have the abil-ity to open the incentives spigot when needed.

2. 2. Pent up demand is rising. Sales are likely to be 20% below anticipated pre-crisis levels in 2020. Vehicles wear out, leases expire, and the technology gap between new vehicles and the average ten year old car on the road widens. About 10,000 new vehicle purchases are likely to be postponed in the county by the end of ‘21, but they will occur eventually (see page 4).

3. 3. Sales will get a boost by changes in behavior caused by the virus. People are reluctant to board a plane, get on a train, or take a shared ride. Using your own vehicle is the best safe haven from the risks inherent in other modes of transporta-tion. When the threat from the virus wanes, some will return to planes, trains, and shared rides, but the advantages of having your own vehicle will remain. Vehicle ownership provides free-dom, independence, and a sense of personal control. These benefits are garnering more attention right now, and should still impact consumer behavior, even when COVID-19 fades.

Thankfully, the first half of 2020 is now history. New vehicle registrations in the county declined 33% during the first six months of 2020 versus a year earlier. Attention is now squarely focused on what lies ahead. The fol-lowing page shows Auto Outlook’s annual forecast for the next two years. These projections are subject to above average uncertainty, while defining the exact shape of the recovery is even trickier. The outlook is almost exclusively dependent on the course of a never-before seen virus, not the normal forecast determinants that analysts typically track.

Nevertheless, there are enough clues to piece together a general impres-sion of what lies ahead. On the right is an illustration of how Auto Outlook believes new vehicle sales will progress during the next two years. It is not drawn to scale and does not represent an actual forecast. Instead, it shows the basic trajectory and cyclical patterns that could emerge. There are four phases indicated on the graph that are described below:

The pandemic arrived, businesses closed, and new vehicle sales collapsed. That’s all we need to say.

Sales got a short term boost from the release of some pent up demand (partially resulting from lease turn-ins that were postponed), resilient household incomes (supported by unemployment compensation benefits and stimulus checks), and the advance of online/remote sales.

Sales soften as initial pent up demand is released, new vehicle inventories are tight, restrictions on business operations are lifted slowly, stimulus checks are ending, unemployment compensation benefits ease, and consumer sentiment is impacted by concerns related to how long the pandemic will last and consequences for employment and income. This is where the market is now.

An extended period that could last for two years. The trend is gradually upward, but sales will be subject to periods of ups and downs due to possible surges in the virus and any business shutdowns. The eco-nomic shock has been significant, and it will likely take years for a full rebound. The trend should be “upward sloping” (see list on the right), but is unlikely to be steady or consistent.

The chances of a fast recovery seem slim, but there is more “upside po-tential” for the outlook than downside. The likelihood that the economic slump will significantly worsen is low, but the introduction of a vaccine or highly effective treatment for the virus would significantly increase the slope of the upward trend and decrease the frequency of the stops and starts.

Phase 1

Phase 2

Phase 3

Phase 4

Phase 1

Overall Trend for County New Vehicle Sales

There has been much debate on what the shape of the auto sales recov-ery will look like. Some initially thought it would resemble a V, consensus then shifted to a W, and many are now suggesting shapes that look nothing like letters. Above is our general view of how the recovery could progress. Key phases indicated on the graph are explained on the left.

Mar ‘20 May ‘20 Aug ‘20 Dec ‘21

Phase 2

Phase 3

Phase 4

Silicon Valley Auto Outlook

45.7% 48.6% 48.7% 51.5% 55.2%

2016 2017 2018 2019 YTD '20

25.0% 25.1%

32.5% 33.1% 34.4%

2016 2017 2018 2019 YTD '20

Silicon Valley Auto OutlookPublished for: Silicon Valley Auto Dealers Association

1762 Technology Drive, Suite 122, San Jose, CA 95110 Phone: 408.437.7557Stephen Smith, President Email: [email protected]

Published by: Auto Outlook, Inc.PO Box 390, Exton, PA 19341 Phone: 610-640-1233

Editor: Jeffrey A. Foltz EMail: [email protected]

Information quoted must be attributed to Silicon Valley Auto Outlook, published by Auto Outlook, Inc. on behalf of the Silicon Valley Automobile Dealers Association, and must also include the statement: “Data Source: AutoCount Data from Experian.” Copyright Auto Outlook, Inc., July 2020

At Auto Outlook, we strive to provide sound and accurate analyses and forecasts based upon the data available to us. However, our forecasts are derived from third-party data and contain a number of assumptions made by Auto Outlook and its management, including, without limitation, the accuracy of the data compiled. As a result, Auto Outlook can make no representation or warranty with respect to the accuracy or completeness of the data we provide or the forecasts or projections that we make based upon such data. Auto Outlook ex-pressly disclaims any such warranties, and undue reliance should not be placed on any such data, forecasts, projections, or predictions. Auto Outlook under-takes no obligation to update or revise any predictions or forecasts, whether as a result of any new data, the occurrence of future events, or otherwise.

Santa Clara County New Vehicle Market Dashboard

Auto Outlook predicts that the county market will decline 24.5% for all of this year ver-sus year earlier. Barring a big negative surprise related to the pandemic, the market is likely to post a sizeable increase in 2021. And if there is an effec-tive treatment or vaccine, the gain could be higher.

County New Retail Light Vehicle Registrations Annual Percent Change

24.5%2019 to 2020:

15.5%

2020 to 2021:

MARKET PERFORMANCE IN 2020

Santa Clara County

DOWN 33.0%U.S.

DOWN 20.7%

YTD 2020 thru June % Change In

New Retail Market vs. Year Earlier

Both markets declined sharply in the first half of this year, al-though the county had a larger drop. Source for county regis-trations: AutoCount data from Experian. U.S. figures estimat-ed by Auto Outlook.

ANNUAL FORECASTS

KEY TRENDS DURING PAST 5 YEARS

LightTruck

MarketShare

2016 thru 2019and

YTD ‘20 (June)

LuxuryBrand

MarketShare

2016 thru 2019and

YTD ‘20 (June)

Light truck share has increased by 9.5 share points during past 5 years.

Luxury brand share has increased by 9.4 share points during past 5 years.

Data Source: AutoCount data from Experian.

90599

6840079000

2019 2020 2021

Years

Covering Second Quarter 2020

Mazda 3.4%

Lexus 3.9%

Mercedes 4.1%

BMW 4.3%

Chevrolet 4.8%

Subaru 5.4%

Ford 5.7%

Tesla 12.7%

Honda 12.7%

Toyota 17.3%

Toyota Prius 1.6%

Chevrolet Bolt 1.7%

Ford F-Series 1.7%

Honda CR-V 2.5%

Honda Accord 2.5%

Toyota Corolla 2.8%

Toyota Camry 3.1%

Honda Civic 3.5%

Toyota RAV4 4.7%

Tesla Model 3 9.8%

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Santa Clara County New Vehicle Market Dashboard

TRACKING ECONOMIC INDICATORS

Total Employment in Santa Clara County

After trending upward for the past eight years, county employment tum-bled in April as the CO-VID crisis hammered the county economy. Employ-ment was basically flat in May. The county unem-ployment rate was 11.0% in May, up from 2.2% a year earlier, but off from the high in April. Although employment declined, compensation for those still working increased in May vs. year earlier.Up $2.68 vs.

year earlier

MAY 2019SU MO TU WE TH FR SA

2.2%

Monthly Unemployment Rates in Santa Clara County

APRIL 2020SU MO TU WE TH FR SA

11.7%

MAY 2020SU MO TU WE TH FR SA

11.0%

Average Hourly Earnings forAll Workers in County - May 2020

$48.19$48.19

TOP TEN RANKINGS IN COUNTY MARKET

University ofMichiganConsumerSentiment

KeyValuesDuringPast

10 Years

Market Share for Top Ten Selling Brands in County MarketYTD 2020 thru June

Market Share for Top Ten Selling Models in County MarketYTD 2020 thru June

10 year low - 55.7 (Aug. 2011)

10 year high - 101.4 (Mar. 2018)

Most recent - 78.1 (Jun. 2020)

12 month high - 101.0 (Feb. 2020)

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Sources: Bureau of Labor Statistics, University of Michigan, and U.S. Bureau of Econ. analysis.



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IMPACT OF COVID-19 ON LONG TERM TREND FOR COUNTY MARKET

Postponed Purchases Could Approach 10,000 Units by 2021

The first graph below shows actual new retail light vehicle registrations in the county between 2005 and 2019, and Auto Outlook’s forecast for 2020 and 2021. The graph also shows the long term trendline, which is primarily a function of driving age popula-tion. Actual registrations typically move above and below the baseline due to changing economic conditions. Of course, in 2020, the shift below baseline occurred due to the pandemic. The second graph shows the cumulative difference between actual registra-tions and trendline levels. In years when actual registrations exceed baseline, the bars grow taller. When actual registrations fall below baseline, the bars grow smaller.

County Annual New Retail Light Vehicle Registrations - 2005 thru 2019, 2020 and 2021 Forecast

The new vehicle sales slump resulting from the COVID-19 pandemic will lead to estimated pent up demand of 9,612 units by the end of 2021. This will provide a boost to sales when the pandemic fades and the economy recovers.

Cumulative Actual Registrations Minus Baseline - 2005 thru 2021

Grey line shows actual new vehicle registrations Registrations dipped well below trendline in

2009 (financial crisis) and 2020 (COVID crisis).

Blue line represents trendline - projected registrations, absent cyclical events

When bars are below zero (shaded red), pent up demand is growing (actual sales have been below baseline) and future sales are likely to move higher.

Pent up demand in the county market is pro-jected to approach 10,000 units by next year.

Source for historical registrations: AutoCount data from Experian.


Estimated Quarterly Alternative Powertrain Market Share(includes hybrid and electric vehicles)

The graph above shows estimated hybrid powertrain and electric vehicle market share in the county. Registrations by powertrain for vehicles equipped with multiple engine types were estimated by Auto Outlook. The estimates are based on model registrations compiled by Experian, and engine installation rates collected from other sources.

Year To Date Share by Engine Type(2019 and 2020, thru June)

HYBRID AND ELECTRIC VEHICLES

Electric Vehicle Share Declines In Second Quarter of 2020

SEGMENT MARKET SHARES

Non Luxury SUV Market Share Increases to 28.9%

Change in Segment Market Share YTD 2020 thru June vs. YTD 2019

Segment Market Shares in County YTD 2020 thru June

The graph above shows the change in market share so far this year vs. year earlier. The colors for each segment are identical to the pie chart. Darker shades are larger segments (i.e., Non Luxury SUV has the highest market share, and is dark green). Data Source: AutoCount data from Experian.

The pie chart above shows market share in the county for six primary seg-ments. Non Luxury SUV was the largest, followed by Pickups and Vans.Data Source: AutoCount data from Experian.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Q1'19

Q2'19

Q3'19

Q4'19

Q1'20

Q2'20

Electric Hybrid Plug In Hybrid

Non Luxury SUVs, 28.9%

Luxury & Sports Cars, 18.4%

Small Cars, 17.5%

Luxury SUVs, 15.8%

Pickups and Vans, 10.4%

Non Luxury Mid Size & Large Cars, 8.9%

-2.0

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-1.5

1.2

1.7

2.4

Small Cars

Luxury & Sports Cars

Non Luxury Mid Size& Large Cars

Pickups and Vans

Luxury SUVs

Non Luxury SUVs

YTD '19 YTD '20

Electric 17.3% 15.9%

Hybrid 5.7% 6.5%

Plug In Hybrid 3.9% 2.9%


1.1%

0.9%

1.2%

1.9%

2.2%

1.4%

3.4%

2.6%

3.3%

3.0%

3.7%

3.6%

4.2%

4.2%

4.9%

5.1%

5.2%

13.7%

12.9%

15.5%

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1.1%

1.4%

1.8%

1.8%

1.8%

2.4%

2.9%

2.9%

3.0%

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4.8%

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5.7%

12.7%

12.7%

17.3%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%

Volvo

Porsche

GMC

Acura

Jeep

Kia

Volkswagen

Hyundai

Nissan

Audi

Mazda

Lexus

Mercedes

BMW

Chevrolet

Subaru

Ford

Honda

Tesla

Toyota

YTD '20

YTD '19

BRAND RESULTS IN FIRST HALF OF 2020

Ford and Kia Market Share Increased in First Half of ‘20

Brand Market Share - YTD 2019 and YTD 2020, thru June

FOURKEY

FACTS


Ford market share increased by 0.5 of a point.

Table above shows the five brands had an increase in registrations, or the smallest decreases. (Rankings are for top 30 brands only.)

Brand

% change in registrations

YTD '20 thru June vs. YTD '19

Cadillac 8.8%

Kia -12.1%

Porsche -16.0%

Hyundai -23.9%

GMC -24.5%

Five Brands that Fared the Best in First Half of 20201. 1. Toyota, Tesla, Honda, Ford, and Subaru were mar-ket share leaders

2. 2. Cadillac had the largest percentage increase in registrations during the first half of this year

3. 3. Registrations fell by less than 25% for four brands (Kia, Porsche, Hyundai, and GMC)

4. 4. Ford, Kia, Hyundai, Lexus, and Subaru had the largest increases in market share


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SUV CLOSE UP

Toyota is Top Selling Non-Luxury SUV Brand

New Retail Light Vehicle Registrations in Non Luxury SUV Segments - YTD 2020 thru June

The two graphs below show new retail light vehicle registrations for Non Luxury and Luxury SUV brands. Each graph shows Small SUV registrations and Mid Size and Large registrations. Brands are positioned from left to right based on total registrations. Each circle corresponds to brand registrations for Small SUVs (blue circle) and Mid Size and Large SUVs (red circle). Note: Small SUVs consist of subcompact and compact models.

Toyota is the best-selling Non Luxury Brand, and Small SUVs were higher.

Mid Size and Large SUV registrations were higher for Ford.


New Retail Light Vehicle Registrations in Luxury SUV Segments - YTD 2020 thru June

Note: Small SUVs consist of subcompact and compact models.

Lexus was the best-selling luxury SUV brand

Small SUVs were higher for BMW.


The table above shows new retail light vehicle (car and light truck) registrations in Santa Clara County. Figures are shown for the Second Quarters of 2019 and 2020, and year to date totals. The top ten ranked brands in each category are shaded yellow.

Brand Registrations ReportSanta Clara County New Retail Car and Light Truck Registrations

Second Quarter YTD thru June

Registrations Market Share (%) Registrations Market Share (%)

2Q '19 2Q '20 % change 2Q '19 2Q '20 Change YTD '19 YTD '20 % change YTD '19 YTD '20 Change

TOTAL 22,594 9,109 -59.7 45,302 30,340 -33.0

Cars 11,279 3,653 -67.6 49.9 40.1 -9.8 22,687 13,593 -40.1 50.1 44.8 -5.3

Light Trucks 11,315 5,456 -51.8 50.1 59.9 9.8 22,615 16,747 -25.9 49.9 55.2 5.3

Domestic Brands 6,445 2,966 -54.0 28.5 32.6 4.1 13,380 8,968 -33.0 29.5 29.6 0.1

European Brands 4,324 1,607 -62.8 19.1 17.6 -1.5 8,575 5,409 -36.9 18.9 17.8 -1.1

Japanese Brands 10,830 4,109 -62.1 47.9 45.1 -2.8 21,532 14,495 -32.7 47.5 47.8 0.3

Korean Brands 995 427 -57.1 4.4 4.7 0.3 1,815 1,468 -19.1 4.0 4.8 0.8

Acura 422 133 -68.5 1.9 1.5 -0.4 878 549 -37.5 1.9 1.8 -0.1

Alfa Romeo 37 27 -27.0 0.2 0.3 0.1 82 61 -25.6 0.2 0.2 0.0

Audi 664 187 -71.8 2.9 2.1 -0.8 1,346 905 -32.8 3.0 3.0 0.0

BMW 1,009 373 -63.0 4.5 4.1 -0.4 1,918 1,293 -32.6 4.2 4.3 0.1

Buick 66 24 -63.6 0.3 0.3 0.0 153 81 -47.1 0.3 0.3 0.0

Cadillac 62 47 -24.2 0.3 0.5 0.2 113 123 8.8 0.2 0.4 0.2

Chevrolet 1,113 522 -53.1 4.9 5.7 0.8 2,209 1,448 -34.4 4.9 4.8 -0.1

Chrysler 149 38 -74.5 0.7 0.4 -0.3 324 156 -51.9 0.7 0.5 -0.2

Dodge 223 74 -66.8 1.0 0.8 -0.2 390 254 -34.9 0.9 0.8 -0.1

FIAT 11 2 -81.8 0.0 0.0 0.0 37 8 -78.4 0.1 0.0 -0.1

Ford 1,116 736 -34.1 4.9 8.1 3.2 2,334 1,724 -26.1 5.2 5.7 0.5

Genesis 19 8 -57.9 0.1 0.1 0.0 20 29 45.0 0.0 0.1 0.1

GMC 291 177 -39.2 1.3 1.9 0.6 564 426 -24.5 1.2 1.4 0.2

Honda 3,046 1,118 -63.3 13.5 12.3 -1.2 6,225 3,859 -38.0 13.7 12.7 -1.0

Hyundai 654 238 -63.6 2.9 2.6 -0.3 1,175 894 -23.9 2.6 2.9 0.3

Infiniti 106 17 -84.0 0.5 0.2 -0.3 241 87 -63.9 0.5 0.3 -0.2

Jaguar 69 15 -78.3 0.3 0.2 -0.1 156 74 -52.6 0.3 0.2 -0.1

Jeep 501 211 -57.9 2.2 2.3 0.1 979 533 -45.6 2.2 1.8 -0.4

Kia 322 181 -43.8 1.4 2.0 0.6 620 545 -12.1 1.4 1.8 0.4

Land Rover 178 76 -57.3 0.8 0.8 0.0 363 252 -30.6 0.8 0.8 0.0

Lexus 764 272 -64.4 3.4 3.0 -0.4 1,644 1,178 -28.3 3.6 3.9 0.3

Lincoln 17 16 -5.9 0.1 0.2 0.1 43 53 23.3 0.1 0.2 0.1

Maserati 18 3 -83.3 0.1 0.0 -0.1 42 14 -66.7 0.1 0.0 -0.1

Mazda 802 298 -62.8 3.5 3.3 -0.2 1,661 1,030 -38.0 3.7 3.4 -0.3

Mercedes 943 433 -54.1 4.2 4.8 0.6 1,902 1,248 -34.4 4.2 4.1 -0.1

MINI 91 41 -54.9 0.4 0.5 0.1 200 112 -44.0 0.4 0.4 0.0

Mitsubishi 37 11 -70.3 0.2 0.1 -0.1 52 33 -36.5 0.1 0.1 0.0

Nissan 717 250 -65.1 3.2 2.7 -0.5 1,510 875 -42.1 3.3 2.9 -0.4

Other 45 22 -51.1 0.2 0.2 0.0 70 58 -17.1 0.2 0.2 0.0

Porsche 200 146 -27.0 0.9 1.6 0.7 412 346 -16.0 0.9 1.1 0.2

Ram 215 126 -41.4 1.0 1.4 0.4 432 317 -26.6 1.0 1.0 0.0

Subaru 1,212 499 -58.8 5.4 5.5 0.1 2,305 1,645 -28.6 5.1 5.4 0.3

Tesla 2,692 995 -63.0 11.9 10.9 -1.0 5,839 3,853 -34.0 12.9 12.7 -0.2

Toyota 3,724 1,511 -59.4 16.5 16.6 0.1 7,016 5,239 -25.3 15.5 17.3 1.8

Volkswagen 791 206 -74.0 3.5 2.3 -1.2 1,560 738 -52.7 3.4 2.4 -1.0

Volvo 268 76 -71.6 1.2 0.8 -0.4 487 300 -38.4 1.1 1.0 -0.1Source: AutoCount data from Experian.

covering second quarter 2020 volume 18, number 3 silicon

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