Covering Second Quarter 2020 Volume 2, Number 3 Nevada ...

[Pages:8]Covering Second Quarter 2020

Volume 2, Number 3

Nevada Auto OutlookTM

Sponsored by: Nevada Franchised Auto Dealers Association

SPECIAL REPORT

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

Thankfully, the first half of 2020 is now history. New vehicle registrations in Nevada declined 12.7% during the first six months of 2020 versus a year earlier. Attention is now squarely focused on what lies ahead. The following 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 impression 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:

Phase 1 The pandemic arrived, businesses closed, and new vehicle sales collapsed. That's all we need to say.

Phase 2 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.

Phase 3 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.

Phase 4 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 economic 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 potential" 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.

Overall Trend for State New Vehicle Sales

Phase 1

Phase 3

Phase 2

Phase 4

Mar `20 May `20 Aug `20

Dec `21

There has been much debate on what the shape of the auto sales recovery 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.

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

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 ability to open the incentives spigot when needed.

2. Pent up demand is rising. Sales are likely to be 13% 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 66,000 new vehicle purchases are likely to be postponed in the state by the end of `21, but they will occur eventually (see page 4).

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 transportation. 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 freedom, 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.

Page 2

Nevada New Vehicle Market Dashboard

Nevada Auto Outlook

MARKET PERFORMANCE IN 2020

YTD 2020 thru June % Change In

New Retail Market vs. Year Earlier

Nevada

U.S.

DOWN 12.7% DOWN 20.7%

ANNUAL FORECASTS

Both markets declined sharply in the first half of this year, although the state had a smaller drop. Source for state registrations: AutoCount data from Experian. U.S. figures estimated by Auto Outlook.

State New Retail Light Vehicle Registrations

111528

95000

105000

2019

2020 Years

2021

Annual Percent Change 2019 to 2020:

14.8%

2020 to 2021:

10.5%

KEY TRENDS DURING PAST 5 YEARS

Auto Outlook predicts that the state market will decline 14.8% for all of this year versus year earlier. Barring a big negative surprise related to the pandemic, the market is likely to post a double digit percentage increase in 2021. And if there is an effective treatment or vaccine, the gain could be higher.

Light Truck Market Share 2016 thru 2019 and YTD `20 (June)

53.7%

59.2%

64.1%

67.1%

70.6%

Light truck share has increased by 16.9 share points during past 5 years.

2016 2017 Data Source: AutoCount data from Experian.

2018

2019 YTD '20

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 expressly disclaims any such warranties, and undue reliance should not be placed on any such data, forecasts, projections, or predictions. Auto Outlook undertakes 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.

Luxury Brand Market Share 2016 thru 2019

and YTD `20 (June)

13.2% 13.1% 13.9% 14.9% 14.9%

Luxury brand share has increased by 1.7 share points during past 5 years.

2016 2017 2018 2019 YTD '20

Nevada Auto Outlook

Published for: Nevada Franchised Auto Dealers Association PO Box 7320, Reno, NV 89510-7320 Phone: 775-331-6884

Email: nfada@

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

Editor: Jeffrey A. Foltz EMail: jfoltz@

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

Covering Second Quarter 2020

Nevada New Vehicle Market Dashboard

Page 3

TRACKING ECONOMIC INDICATORS

Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20

Millions

Total Employment in Nevada

2.0 1.5 1.0 0.5

Monthly Unemployment Rates in Nevada

JUNE 2019

SU

MO

TU

WE

TH

FR

SA

MAY 2020

SU

MO

TU

WE

TH

FR

SA

JUNE 2020

SU

MO

TU

WE

TH

FR

SA

3.9% 25.3% 15.0%

Average Hourly Earnings for All Workers in State - May 2020

$27.00

Up $2.69 vs. year earlier

After trending upward for the past eight years, state employment tumbled in April as the COVID crisis hammered the state economy. Employment rebounded in June. The state unemployment rate was 15.0% in June, up from 3.9% a year earlier, but well off from the high in April. Although employment declined, compensation for those still working increased in May vs. year earlier.

University of Michigan Consumer Sentiment

Key Values During

Past 10 Years

10 year high - 101.4 (Mar. 2018) 12 month high - 101.0 (Feb. 2020)

Most recent - 78.1 (Jun. 2018)

10 year low - 55.7 (Aug. 2011)

Percent Change in

U.S. Gross Domestic Product

Change vs. previous

quarter

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

TOP TEN RANKINGS IN STATE MARKET

Change vs. preceding quarter

6.0

-4.0

-14.0

-24.0

-34.0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Quarters shown for each year

Market Share for Top Ten Selling Brands in State Market YTD 2020 thru June

Toyota 16.2%

Chevrolet 9.8%

Honda 8.7%

Ford 7.9%

Hyundai 6.2%

Jeep 5.8%

Subaru 5.6%

Nissan 4.8%

Ram 4.5%

Kia 3.9%

Data Source: AutoCount data from Experian.

Market Share for Top Ten Selling Models in State Market YTD 2020 thru June

Ram Pickup 4.4% Chevrolet Silverado 3.5%

Toyota RAV4 3.4% Ford F-Series 3.2% Toyota Tacoma 2.7% Toyota Corolla 2.4% Honda Civic 2.4% Honda CR-V 2.2% Toyota Camry 2.1% Jeep Wrangler 1.8%

Page 4

Nevada Auto Outlook

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

Postponed Purchases Could Approach 66,000 Units by 2021

The first graph below shows actual new retail light vehicle registrations in Nevada 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 population. 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 registrations and trendline levels. In years when actual registrations exceed baseline, the bars grow taller. When actual registrations fall below baseline, the bars grow smaller.

The new vehicle sales slump resulting from the COVID-19 pandemic will lead to estimated pent up demand of 65,275 units by the end of 2021. This will provide a significant boost to sales when the pandemic fades and the economy recovers.

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

160000 140000

Blue line represents trendline - projected registrations, absent cyclical events

120000

New vehicle registrations

100000

80000

60000

40000 20000

Grey line shows actual new vehicle registrations

Registrations dipped well below trendline in 2009 (financial crisis) and 2020 (COVID crisis).

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Years

150000

Cumulative Actual Registrations Minus Baseline - 2005 thru 2021

100000 50000

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.

New vehicle registrations

0

-50000 -100000

Pent up demand in the state market is projected to approach 66,000 units by next year.

-150000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Source for historical registrations: AutoCount data from Experian.

Covering Second Quarter 2020 HYBRID AND ELECTRIC VEHICLES

Electric Vehicle Share Moves Lower During COVID Crisis

Page 5

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

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

Q1

Q2

Q3

Q4

Q1

Q2

'19

'19

'19

'19

'20

'20

Electric

Hybrid

Plug In Hybrid

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

Hybrid

YTD '19 YTD '20 3.4% 2.9%

Electric

2.7% 2.3%

Plug In Hybrid 0.4% 0.3%

The graph above shows estimated hybrid powertrain and electric vehicle market share in the state. 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.

SEGMENT MARKET SHARES

Non Luxury SUV Market Share Increases to 40.1%

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

Non Luxury SUVs

2.1

Pickups and Vans

2.0

Luxury SUVs

Non Luxury Mid Size & Large Cars

Luxury & Sports Cars

0.6 -1.0 -1.2

Small Cars

-2.3

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.

Segment Market Shares in State YTD 2020 thru June

Luxury & Sports Non Luxury Mid Cars, 6.4%

Size & Large Cars, 8.3%

Luxury SUVs, 8.8%

Non Luxury SUVs, 40.1%

Small Cars, 14.7%

Pickups and Vans, 21.7%

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

Page 6

SUV CLOSE UP

Toyota is Top Selling Non-Luxury SUV Brand

Nevada Auto Outlook

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 (orange circle) and Mid Size and Large SUVs (blue circle). Note: Small SUVs consist of subcompact and compact models.

YTD 2020 Registrations

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

2000 1500 1000

Small SUVs were higher for Toyota and Jeep.

Ford Mid Size and Large SUV registrations exceeded Small SUVs.

Mid Size and Large SUV Small SUV

500

Toyota was the best-selling non-luxury SUV brand

0

Toyota Jeep

Subaru Chevrolet

Honda Hyundai

Ford Nissan

Kia Mazda Volkswagen Dodge

GMC Buick Mitsubishi MINI

FIAT

YTD 2020 Registrations

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

600

500

400

300

200

100

Lexus was the best-

selling luxury SUV brand

0

Small SUVs were higher for BMW.

Luxury Mid Size and Large SUV Luxury Small SUV

Lexus Mercedes

Audi BMW Acura Land Rover Cadillac Lincoln Tesla Volvo Porsche Infiniti Jaguar Alfa Romeo Other Maserati

Data Source: AutoCount data from Experian.

Note: Small SUVs consist of subcompact and compact models.

Covering Second Quarter 2020

Review of Regional New Vehicle Markets in Nevada

Page 7

Carson City (Carson County) Elko (Elko County) Las Vegas (Clark County) Reno (Washoe County)

New Retail Light Vehicle Registrations in Regional Markets

YTD registrations thru June

Light truck market share (%)

Market share for top 5 selling brands in state

YTD '19 YTD '20 % change YTD '19 YTD '20 change Toyota Chevrolet Honda

Ford Hyundai

903

895 -0.9% 76.6

80.8

4.1

18.1

9.6

7.9

4.9

9.1

1,135 1,034 -8.9% 88.2 88.7

0.5

25.6

11.2

1.6

23.3

1.0

39,307 33,741 -14.2% 61.9 66.3

4.4

16.2

11.3

8.1

9.1

7.2

8,132 7,324 -9.9% 73.6 79.7

6.1

16.3

8.3

5.5

4.3

7.2

Data Source: AutoCount data from Experian.

YTD SHARE FOR TOP 10 BRANDS

BEST SELLING MODELS

Regional Market Share (%) for Top 10 Brands in State

Toyota

Chevrolet Honda

Toyota share in Elko County was 25.6%.

Ford

Hyundai

Jeep

Subaru Nissan

Subaru share in Reno was 15.7%.

Ram

Kia 0.0

5.0

10.0 15.0 20.0 25.0 30.0

Carson City Elko Las Vegas Reno

Top Five Sellling Models in Regional Markets

Based on New Retail Light Vehicle Registrations

YTD 2020 thru June

Carson City

1

Ram Pickup

2

Chevrolet Silverado

3

Toyota RAV4

4

Subaru Forester

5

Subaru Outback

Elko

1

Ford F-Series

2

Ram Pickup

3

Toyota Tacoma

4

Chevrolet Silverado

5

GMC Sierra

Las Vegas

1

Ram Pickup

2

Chevrolet Silverado

3

Ford F-Series

4

Toyota RAV4

5

Toyota Corolla

Reno

1

GMC Sierra

2

Ram Pickup

3

Toyota RAV4

4

Chevrolet Silverado

5

Toyota Tacoma

Data Source: AutoCount data from Experian.

Page 8

Nevada Auto Outlook

TOTAL

Brand Registrations Report

Nevada 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

27,275 21,134 -22.5

53,704 46,874 -12.7

Cars Light Trucks

9,190 6,071 -33.9

33.7

28.7 -5.0 18,263 13,792 -24.5

34.0

29.4 -4.6

18,085 15,063 -16.7

66.3

71.3

5.0 35,441 33,082

-6.7

66.0

70.6

4.6

Domestic Brands 10,313 8,306 -19.5

37.8

39.3

1.5 20,595 17,575 -14.7

38.3

37.5 -0.8

European Brands 2,648 2,171 -18.0

9.7

10.3

0.6 5,342 4,971

-6.9

9.9

10.6

0.7

Japanese Brands 11,786 8,460 -28.2

43.2

40.0 -3.2 23,167 19,519 -15.7

43.1

41.6 -1.5

Korean Brands

2,528 2,197 -13.1

9.3

10.4

1.1 4,600 4,809

4.5

8.6

10.3

1.7

Acura

301

192 -36.2

1.1

0.9 -0.2

662

448 -32.3

1.2

1.0 -0.2

Alfa Romeo

124

40 -67.7

0.5

0.2 -0.3

235

101 -57.0

0.4

0.2 -0.2

Audi

325

368

13.2

1.2

1.7

0.5

785

835

6.4

1.5

1.8

0.3

BMW

395

332 -15.9

1.4

1.6

0.2

796

838

5.3

1.5

1.8

0.3

Buick

168

144 -14.3

0.6

0.7

0.1

391

308 -21.2

0.7

0.7

0.0

Cadillac

181

127 -29.8

0.7

0.6 -0.1

370

317 -14.3

0.7

0.7

0.0

Chevrolet

2,536 2,223 -12.3

9.3

10.5

1.2 5,139 4,613 -10.2

9.6

9.8

0.2

Chrysler

194

119 -38.7

0.7

0.6 -0.1

329

269 -18.2

0.6

0.6

0.0

Dodge

674

515 -23.6

2.5

2.4 -0.1 1,256 1,008 -19.7

2.3

2.2 -0.1

FIAT

35

20 -42.9

0.1

0.1

0.0

66

45 -31.8

0.1

0.1

0.0

Ford

2,363 1,703 -27.9

8.7

8.1 -0.6 4,879 3,718 -23.8

9.1

7.9 -1.2

Genesis

42

14 -66.7

0.2

0.1 -0.1

80

71 -11.3

0.1

0.2

0.1

GMC

655

669

2.1

2.4

3.2

0.8 1,324 1,340

1.2

2.5

2.9

0.4

Honda

2,416 1,710 -29.2

8.9

8.1 -0.8 4,841 4,088 -15.6

9.0

8.7 -0.3

Hyundai

1,474 1,277 -13.4

5.4

6.0

0.6 2,775 2,905

4.7

5.2

6.2

1.0

Infiniti

189

60 -68.3

0.7

0.3 -0.4

376

156 -58.5

0.7

0.3 -0.4

Jaguar

34

35

2.9

0.1

0.2

0.1

70

70

0.0

0.1

0.1

0.0

Jeep

1,777 1,377 -22.5

6.5

6.5

0.0 3,187 2,716 -14.8

5.9

5.8 -0.1

Kia

1,012

906 -10.5

3.7

4.3

0.6 1,745 1,833

5.0

3.2

3.9

0.7

Land Rover

158

120 -24.1

0.6

0.6

0.0

324

263 -18.8

0.6

0.6

0.0

Lexus

635

412 -35.1

2.3

1.9 -0.4 1,322 1,243

-6.0

2.5

2.7

0.2

Lincoln

125

75 -40.0

0.5

0.4 -0.1

289

260 -10.0

0.5

0.6

0.1

Maserati

19

8 -57.9

0.1

0.0 -0.1

50

18 -64.0

0.1

0.0 -0.1

Mazda

540

413 -23.5

2.0

2.0

0.0

975

963

-1.2

1.8

2.1

0.3

Mercedes

602

372 -38.2

2.2

1.8 -0.4 1,119 1,015

-9.3

2.1

2.2

0.1

MINI

73

44 -39.7

0.3

0.2 -0.1

145

89 -38.6

0.3

0.2 -0.1

Mitsubishi

131

29 -77.9

0.5

0.1 -0.4

260

80 -69.2

0.5

0.2 -0.3

Nissan

1,477

983 -33.4

5.4

4.7 -0.7 2,961 2,252 -23.9

5.5

4.8 -0.7

Other

46

60

30.4

0.2

0.3

0.1

104

147

41.3

0.2

0.3

0.1

Porsche

119

92 -22.7

0.4

0.4

0.0

231

205 -11.3

0.4

0.4

0.0

Ram

1,155 1,010 -12.6

4.2

4.8

0.6 2,051 2,105

2.6

3.8

4.5

0.7

Subaru

1,461 1,134 -22.4

5.4

5.4

0.0 2,841 2,618

-7.8

5.3

5.6

0.3

Tesla

485

344 -29.1

1.8

1.6 -0.2 1,380

921 -33.3

2.6

2.0 -0.6

Toyota

4,633 3,492 -24.6

17.0

16.5 -0.5 8,926 7,594 -14.9

16.6

16.2 -0.4

Volkswagen

620

648

4.5

2.3

3.1

0.8 1,235 1,248

1.1

2.3

2.7

0.4

Volvo

101

67 -33.7

0.4

0.3 -0.1

185

174

-5.9

0.3

0.4

0.1

Source: AutoCount data from Experian.

The table above shows new retail light vehicle (car and light truck) registrations in Nevada. 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.

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