Auto and Gas Industries Ride Out Pandemic Conditions
Auto and Gas Industries Report Low Sales
After a tumultuous year that brought factory closures, car shortages, and new spending habits, the American auto sector is expected to report its lowest yearly sales in nearly a decade. Analysts say US vehicle sales will likely total around 14.4 million to 14.6 million for the year 2020.
Those numbers would represent a 15% drop from 2019, and the lowest number of cars sold since 2012. In the five years preceding the coronavirus pandemic the auto industry experienced a record run during which sales exceeded 17 million cars per year.
Several automakers still need to report their figures before these numbers are finalized, though some have already shared their sales numbers. For example, General Motors (GM) saw an 11.8% sales drop over the course of the year, but a 4.8% rise in sales during the fourth quarter. Nissan’s (NSANY) sales fell 33.2% during the year and were down 19.3% during the fourth quarter.
Sharp Sales Hike Brings Higher Prices
Auto executives were nervous early in the pandemic when factories closed and economic downturn set in. But then consumers surprised the auto industry as demand for cars spiked in the late spring. Since then it has been challenging for factories to meet demand for new cars. As a result, though overall sales numbers are down, the price of cars is rising.
Research firm J.D. Power estimates that consumers paid more for vehicles last year. In early 2020 the average price paid was $34,000, but in December the average price hit $38,000. This trend is partially because dealers are less likely to offer discounts as demand remains higher than supply, and buyers are currently interested in more expensive vehicles like pickup trucks.
Due to low interest rates and a second round of stimulus payments to some Americans, analysts say they expect to see increased car sales in 2021. Additionally, as the pandemic continues, more commuters in the US may opt for personal vehicles over public transportation, which could boost car sales.
Modest Recovery in Fuel Spending Projected
Gas pricing firm GasBuddy also expects fuel spending to make a modest recovery in 2021. Gasoline spending experienced a $100 billion slump in 2020 due to the coronavirus pandemic, bringing the total to $280 billion—the lowest since 2004. This year the firm has forecasted a 16.3% hike in gasoline spending, which would raise the total to $325.6 billion.
The higher spending could be driven, in part, by an average 27 cent-per-gallon price spike around the United States. The firm also said it has noticed more Americans driving to work instead of taking public transportation, or driving instead of flying, during the pandemic. For most people around the country, GasBuddy said it expects prices will remain around $2 per gallon.
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