California car sales are down 18%, but not for all – electric vehicles are hot sellers

Sales of new cars and trucks in California fell 17.9% in the first two quarters of this year, largely due to chronic shortages of computer chips that go into vehicles and a declining economy . But in a first, a pair of electric vehicles finished 1-2 in overall registrations across the state.

The drop in sales led the California New Car Dealers Association to lower its 2022 expectation for new vehicles to 1.8 million, which would be lower than last year’s total of 1.86 million.

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“Demand for new vehicles is expected to slow in the coming months due to weaker economic growth and weakening consumer affordability,” according to the second-quarter auto dealer outlook, “but that’s not expected to lead to a sharp drop in sales”.

California’s numbers are slightly better than the rest of the country, where registrations fell 18.3% from the first six months of 2021.

“The good news is that we’re a little less in decline than the rest of the country, but (close to) 18% is still 18%,” said Brian Maas, president of the California New Car Dealers Association. In San Diego County, sales were down 13.6%.

A shortage of semiconductor microchips that go into cars and trucks has hampered new car sales for 15 months, leaving showrooms and dealer lots bare. Silicon chips essential for laptops, game consoles and televisions also go into brake sensors, power steering, navigation and entertainment systems in modern vehicles.

The chip shortage is a by-product of the pandemic. When COVID-19 hit the United States in March 2020, automakers — fearing they had too much inventory on their hands as the economy hung — canceled or delayed microchip orders.

California’s best-selling vehicles

First semester 2022, ranking and registrations

1. Tesla Model Y 42 320
2. Tesla Model 3 38 993
3.Toyota RAV4 31 599
4.Toyota Camry 28745
5.Toyota Corolla 22391
6.Chevrolet Silverado 20349
7. Ford F-Series 18 598
8. Honda Accord 18,384
9.Honda Civic 18 302
10.Toyota Tacoma 17 777

Source: Experian/CNDA AutoCount data

Overseas semiconductor makers have responded by focusing on consumer electronics, which has seen an increase in demand for chips used in virtual learning, remote healthcare and work devices. home.

But when auto sales rebounded faster than expected in the spring of 2021, microchip makers were unable to keep up with demand and fewer cars and trucks rolled off the assembly lines. The chip shortage was expected to resolve itself in about six months, but it hasn’t, in part due to COVID outbreaks in recent months in Southeast Asia, the part of the world where the most chips are produced.

“We see that we will still have problems at the start of 2023 and perhaps even throughout the year ahead,” said Ivan Drury, senior information manager at automotive market research firm Edmunds. .com.

Dealerships say there is plenty of pent-up demand, but rising inflation has raised fears that customers will buy big-ticket items such as cars and trucks until the economy improves . With the Federal Reserve raising interest rates, auto finance rates have also increased.

Drury just completed research showing that for the first time, the average price of a new vehicle in California exceeded $50,000.

On the other hand, Edmunds statistics show that the average vehicle in California only stays in the field for 19 days. Before the pandemic, the number hovered around 70 days, indicating that the urge to buy is still high.

This seems to be the case, in particular, in the sales of hybrid and electric vehicles, called EV for short.

For the first time, the two top-selling vehicles in the California New Car Dealers Association quarterly report are electric vehicles. Tesla completed shipments of 42,320 orders of its Model Y in the first six months of the year and the Telsa Model 3 racked up 38,993 units.

A Tesla Model Y Long Range on display in February 2021.

(ASSOCIATED PRESS)

“They deserve a lot of credit for making it to the top two,” Maas said of Tesla. “I think in the future, as more and more electric vehicles come onto the market competing on both price, utility and functionality, it will be interesting to see if this is or not a one-time issue or something that Tesla can endure for several quarters.”

Overall, electric vehicles accounted for 15.1% of new registrations share in the first two quarters in California, and when sales of hybrids and plug-in hybrids were added, the market share increased. is high at 29.6%.

The increase in electric and hybrid vehicles came as gasoline prices in California hit a record high in June. While the price at the pump has steadily declined over the past month, the average AAA regular price of $5.35 in the San Diego area is still $1.01 per gallon higher than at the same period last year.

“Is the solution to $5 gas buying a car for $50,000 or $80,000? No, the calculations probably won’t be clean,” Drury said. “But gasoline prices are an emotional subject. We know that some of these commands were boosted by people who were basically above that. They probably said, “I don’t care if gas drops to half price, I’m still going to do it so I don’t have to feel like this anymore.” I just want to cut that out of my life.

Sales of used cars and trucks fell at a lower percentage than new vehicles, down 12% in the first six months of the year.

The lack of inventory of new cars and trucks has led to a boom in used vehicle sales over the past year as many customers have been eager to purchase cars that are only 1 or 2 year. In some cases, vehicles with relatively low mileage have actually sold for more than the manufacturer’s suggested retail price of a new car of the same model.

The Honda Civic was the top-selling used car in the first six months of 2022, accounting for 4.1% of the used vehicle market.

“Seasoned watchers are paying close attention to the data,” Mass said, “in the hope that inflation stabilizes, the Fed doesn’t continue to raise interest rates too much, and we can straighten out the chain of debt.” supply so that we can have availability. of vehicles.”