Pub. 6 2017-2018 Issue 2

Fall 2017 27 Covering Third Quarter 2017 Volume 17, Number 4 San Diego Auto Outlook Comprehensive information on the San Diego County new vehicle market Market Summary Domestics consist of vehicles sold by GM, Ford, FCA (excluding FIAT & Alfa), and Tesla. Historical figures were revised by IHS Markit and will differ slightly from those shown in previous releases. *Figures for Sept., 2017 were estimated by Auto Outlook. Source: IHS Markit. Annual Trend in County Market The graph above shows annual new retail light vehicle registrations in the county from 2010 thru 2016 and Auto Outlook’s projection for 2017. Historical Data Source: IHS Markit. FORECAST 2017 Should be Another Strong Year for New Vehicle Market Incentive to upgrade . Advanced features that were once restricted to luxury vehicles are now commonplace on mainstream products (i.e, mitigation braking, lane alert, smart cruise control, blind spot monitor- ing, rear-view cameras, etc.). These new technologies are providing a strong motivation for consumers to enter the new vehicle market. New products. In the past, auto companies have not been responsive to shifting consumer tastes. But that’s not the case in 2017. As de- mand for SUVs has grown, manufacturers have introduced desirable new products in every conceivable size and configuration. And if fuel prices were to unexpectedly surge, there are a slew of plug in and all- electric vehicles scheduled to be introduced over the next few years. Economic fundamentals are sound. Unemployment rates are very low, incomes are moving higher, household net worth is at an all-time high, GDP growth is solid, and consumer confidence is strong. It would be unprecedented for new vehicle sales to decline sharply in an envi- ronment with such strong core economic fundamentals. Key factors providing a boost to new vehicle sales Pent up demand is easing. Following seven years of increasing sales, the market has fully recovered from the low point in 2009, and as a result, pent up demand is easing. As pointed out on the left, there are a multitude of reasons for automotive consumers to be motivated to replace their current vehicles, but the frequency of purchases that occur out of necessity (i.e., current cars are wearing out) is lessening. Rising interest rates. After several years of hovering near zero, inter- est rates are on the rise. It’s not likely to be an abrupt, upward march, but it’s inevitable that they will increase. Higher interest rates lead to increasing monthly finance and lease payments, which put a drag on new vehicle sales. Insufficient savings . Leading into the financial crisis of 2008, house- holds had amassed record debt. After several years of deleveraging, the debt burden has eased significantly. However, most households still have insufficient savings for retirement. As a result, consumers need to build savings, which will put a crimp on retail spending. Key factors holding back new vehicle sales YTD '16 YTD '17 % Chg. Mkt. Share thru Sept. thru Sept* '16 to '17 2017* TOTAL 121,345 118,326 -2.5% Car 63,153 55,125 -12.7% 46.6% Light Truck 58,192 63,201 8.6% 53.4% Domestic 32,109 31,497 -1.9% 26.6% European 17,469 17,335 -0.8% 14.7% Japanese 62,548 60,137 -3.9% 50.8% Korean 9,219 9,357 1.5% 7.9% 87573 99199 126267 139366 146947 161196 162233 158250 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 2010 2011 2012 2013 2014 2015 2016 2017 Forecast New light vehicle registrations