Americas

Augusto Amorim, Senior Manager, Americas Vehicle Sales Forecasts

30 September 2020

More expensive vehicles defy pandemic odds in the Americas

Most markets in the Americas are doing better than expected, albeit at considerably lower volumes than in 2019. But the pandemic has changed the automotive landscape beyond the issue of volume contraction alone. It has created an unequal market, with more expensive vehicles faring better than their more affordable counterparts.

In the US, Large Pickups peaked at a 20.5% share in April, with the segment staying above the 15% mark for most of the year, compared with a full-year share of 14.1% in 2019. We are now well into the third quarter of 2020 and OEMs are still offering 0% financing, with some support also coming from the construction sector. In the year to August, Large Pickup sales had the best performance among the major segments, with a drop of 9.9% year-on-year, versus a decline of 21.5% for the overall market. This result helped to push average transaction prices to a record US$35,420 in August.

“California and New York, two of the main Premium markets, were subject to stringent lockdown measures, hence the segment declining more sharply than the total industry in March and April.”

The wealth of the market is also reflected in the Premium and Super-Premium segments. While Non-Premium sales fell by 22.1% year-on-year in the eight months to August, Premium sales dropped by 17.7% year-on-year. California and New York, two of the main Premium markets, were subject to stringent lockdown measures, hence the segment declining more sharply than the total industry in March and April. But with the reopening of states and the renewal of incentives (including 0% APR financing), help is now at hand. In fact, since May, Premium sales have outperformed the wider market, with Bentley standing out as the only brand to post growth in every month of 2020 so far.

In Canada, the winners have been SUVs and Pickups. SUVs saw a year-on-year market share gain of 1.2 percentage points during the eight-month period, while Pickups jumped by 3.8 percentage points. As is true for the US market, automakers in Canada are offering generous financing and incentives. Additional support has come from several recently phased-out Car models being replaced by SUVs. The boon in higher-margin vehicles also bumped up average transaction prices, with values rising to a record C$37,500 in Q2, an increase of 5.5% compared with Q2 2019.

“SUVs also fared better than Cars, aided by the recent launch of several high-volume models. At -25.7%, the decline in SUV demand was the smallest in the overall market, tied with the Van segment.”

We have also seen disproportionate changes across the bodystyle and status segments in Brazil. The smallest segment, Sporty, was alone in recording year-on-year growth, albeit to just 1,700 units. SUVs also fared better than Cars, aided by the recent launch of several high-volume models. At -25.7%, the decline in SUV demand was the smallest in the overall market, tied with the Van segment. Small Non-Premium and Compact Premium performed even better, while Large Premium SUV sales soared by 51.9% year-on-year.

So, what do these changing dynamics mean for the future of the market? Price-sensitive consumers have dropped out of the game, likely hindering volume recovery. In the US, August was the first month in which demand for used vehicles did not outstrip new model sales, whereas this was the case in only the first four months of 2019 and only once in 2018.

In short, the pandemic appears to be reshaping the auto industry into a smaller but more profitable one.