Auto industry outlook: Continued path towards recovery despite regulatory and market challenges

To say 2020 was a turbulent year would be an understatement. But the automotive industry – steeled by its experience navigating the 2008-2009 Great Recession – was able to successfully navigate a tidal wave of unexpected challenges brought on by a global pandemic.

Over the span of just a few months, the industry collectively did what had never been done before – shut down every auto plant and major automotive supplier plant around the world for nearly two months, adopted new safety protocols and procedures, and then restarted the entire global production system without any significant disruptions.

Sales of new cars and trucks fell 14% to 14.5 million in the U.S. in 2020, but the industry has collectively been through worse before and most major automakers reported a profit for the year as sales recovered and average vehicle transaction prices continued to increase.

“We’ve said it before, and we’ll say it again: ‘It could have been worse,” Cox Automotive said in 10 Takeaways from U.S. Auto Sales: 2020. “We hit bottom in April, when the industry sold only 702,862 units. As the year ended, we hit 1,590,720 – more than double April’s volume and among the best single month of sales in the past decade, coming in at #10 on that list.”

This year, Cox expects U.S. sales will increase by about 8% to 15.7 new cars and trucks. Globally, J.D. Power/LMC Automotive predict sales will increase 11% to 86 million units, up from 78 million in 2020.

“In 2021, we’ll see a continuing path of recovery. With COVID-19 vaccinations beginning, there is room for further optimism, but the market still needs to weather the risks that are primarily centered in the first quarter,” Jeff Schuster, president, Americas operations and global vehicle forecasts, LMC Automotive said in J.D. Power and LMC Automotive’s Forecast.

Recent economic trends give the global auto industry an opportunity to continue to rebound slowly and steadily – but that doesn’t mean the turbulence will end. In fact, 2021 will be filled with its own, unique challenges.

Here are three additional storylines to watch this year:

Biden era of regulation and policy

All auto suppliers and automakers will be watching closely to see what policy and regulatory changes are ushered in by the Biden administration. One thing is for sure – Midwesterners are in charge. Biden has designated Pete Buttigieg, previously mayor of South Bend, Ind. as his transportation secretary and former Michigan Governor Jennifer Granholm as his energy secretary.

Earlier this week, Biden vowed to replace the U.S. government’s fleet of roughly 650,000 vehicles with electric models as the new administration shifts its focus toward clean energy as part of his “Buy America” executive order. Biden also has set goals of building 550,000 EV charging stations and spending more in clean energy research.

Charged up about EVs

Despite billions of dollars invested in the development of electric vehicles and vast media attention, electric vehicles still only account for a small percentage of the total automotive market and consumers bought fewer of them last year than in 2019. Sales of electric vehicles fell 20% in 2020 to 354,616 compared with 447,103 the year before as gas prices plunged, according to Cox Automotive.

Still, while there were only eight all-electric models on sale U.S. in 2020, their appeal is expected to grow as more models reach the market. Automakers continue to expand their range, performance, and style — and recharging is becoming quicker and easier. In 2021, expect an onslaught of EV’s to go on sale with as many as 21 new models ranging from the Audi Q4 e-tron to the Bollinger B2 to the GMC Hummer arriving at dealerships. See this Car & Driver story for a helpful summary.

Suppliers watch as Stellantis comes to life

Auto suppliers will be watching closely throughout 2021 to see how the merger between Fiat Chrysler Group and PSA Groupe plays out. The two companies completed their merger in January as they formed a new company, called Stellantis.

The combined company includes 16 brands – a structure that will stretch marketing and advertising budgets, causing analysts speculate that some brands might not be around a few years from now. The company’s brands include: Abarth, Alfa Romeo, Chrysler, Citroen, Dodge, DS Automobiles, Fiat, Fiat Professional, Jeep, Lancia, Maserati, Mopar, Opel, Peugeot, Ram and Vauxhall.

While most automotive brands have multiple models in their lineup, Chrysler has just two minivans and the Chrysler 300. Meanwhile, Dodge has established a clear identity in recent years as an American performance and sports car brand, but only has two cars and one SUV in its aging lineup.

If 2020 taught us anything, however, it is that situations and priorities can change in an instant. All of the above trends will continue to be impacted by a variety of external factors as the automotive industry – and the world – adjust and reset from the past year. While long-term impacts won’t be known for many years, 2021 will certainly continue to feel the pandemic’s presence. As we move through the year, expect to see interesting and exciting advancements, partnerships and innovations.