Covering Second Quarter 2020 Volume 2, Number 3 Nevada

Covering Second Quarter 2020 Volume 2, Number 3

Nevada Auto OutlookSponsored by: Nevada Franchised Auto Dealers Association

TM

SPECIAL REPORT

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

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

1. 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 abil-ity to open the incentives spigot when needed.

2. 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. 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 transporta-tion. 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 free-dom, 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.

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 fol-lowing 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 impres-sion 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:

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

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.

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.

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 eco-nomic 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 po-tential” 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.

Phase 1

Phase 2

Phase 3

Phase 4

Phase 1

Overall Trend for State New Vehicle Sales

There has been much debate on what the shape of the auto sales recov-ery 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.

Mar ‘20 May ‘20 Aug ‘20 Dec ‘21

Phase 2

Phase 3

Phase 4

Page 2 Nevada Auto Outlook

53.7%59.2% 64.1% 67.1% 70.6%

2016 2017 2018 2019 YTD '20

13.2% 13.1% 13.9% 14.9% 14.9%

2016 2017 2018 2019 YTD '20

Nevada Auto OutlookPublished for: Nevada Franchised Auto Dealers Association

PO Box 7320, Reno, NV 89510-7320 Phone: 775-331-6884Email: [email protected]

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

Editor: Jeffrey A. Foltz EMail: [email protected]

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

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 ex-pressly disclaims any such warranties, and undue reliance should not be placed on any such data, forecasts, projections, or predictions. Auto Outlook under-takes 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.

Nevada New Vehicle Market Dashboard

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

State New Retail Light Vehicle Registrations Annual Percent Change

14.8%2019 to 2020:

10.5%

2020 to 2021:

MARKET PERFORMANCE IN 2020

Nevada

DOWN 12.7%U.S.

DOWN 20.7%

YTD 2020 thru June % Change In

New Retail Market vs. Year Earlier

Both markets declined sharply in the first half of this year, al-though the state had a smaller drop. Source for state registra-tions: AutoCount data from Ex-perian. U.S. figures estimated by Auto Outlook.

ANNUAL FORECASTS

KEY TRENDS DURING PAST 5 YEARS

LightTruck

MarketShare

2016 thru 2019and

YTD ‘20 (June)

LuxuryBrand

MarketShare

2016 thru 2019and

YTD ‘20 (June)

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

1.7 share points during past 5 years.

Data Source: AutoCount data from Experian.

11152895000

105000

2019 2020 2021

Years

Covering Second Quarter 2020 Page 3

Kia 3.9%

Ram 4.5%

Nissan 4.8%

Subaru 5.6%

Jeep 5.8%

Hyundai 6.2%

Ford 7.9%

Honda 8.7%

Chevrolet 9.8%

Toyota 16.2%

Jeep Wrangler 1.8%

Toyota Camry 2.1%

Honda CR-V 2.2%

Honda Civic 2.4%

Toyota Corolla 2.4%

Toyota Tacoma 2.7%

Ford F-Series 3.2%

Toyota RAV4 3.4%

Chevrolet Silverado 3.5%

Ram Pickup 4.4%

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Nevada New Vehicle Market Dashboard

TRACKING ECONOMIC INDICATORS

Total Employment in Nevada

After trending upward for the past eight years, state employment tumbled in April as the COVID cri-sis 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 employ-ment declined, compen-sation for those still work-ing increased in May vs. year earlier.Up $2.69 vs.

year earlier

JUNE 2019SU MO TU WE TH FR SA

3.9%

Monthly Unemployment Rates in Nevada

MAY 2020SU MO TU WE TH FR SA

25.3%

JUNE 2020SU MO TU WE TH FR SA

15.0%

Average Hourly Earnings forAll Workers in State - May 2020

$27.00$27.00

TOP TEN RANKINGS IN STATE MARKET

University ofMichiganConsumerSentiment

KeyValuesDuringPast

10 Years

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

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

10 year low - 55.7 (Aug. 2011)

10 year high - 101.4 (Mar. 2018)

Most recent - 78.1 (Jun. 2018)

12 month high - 101.0 (Feb. 2020)

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



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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 popula-tion. 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 registra-tions and trendline levels. In years when actual registrations exceed baseline, the bars grow taller. When actual registrations fall below baseline, the bars grow smaller.

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

The new vehicle sales slump resulting from the COVID-19 pandemic will lead to estimated pent up de-mand 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.

Cumulative Actual Registrations Minus Baseline - 2005 thru 2021

Grey line shows actual new vehicle registrations

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

Blue line represents trendline - projected registrations, absent cyclical events

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.

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

Source for historical registrations: AutoCount data from Experian.


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

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.

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

HYBRID AND ELECTRIC VEHICLES

Electric Vehicle Share Moves Lower During COVID Crisis

SEGMENT MARKET SHARES

Non Luxury SUV Market Share Increases to 40.1%

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

Segment Market Shares in State YTD 2020 thru June

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.

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

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Q2'19

Q3'19

Q4'19

Q1'20

Q2'20

Electric Hybrid Plug In Hybrid

YTD '19 YTD '20

Hybrid 3.4% 2.9%

Electric 2.7% 2.3%

Plug In Hybrid 0.4% 0.3%

Non Luxury SUVs, 40.1%

Pickups and Vans, 21.7%

Small Cars, 14.7%

Luxury SUVs, 8.8%

Non Luxury Mid Size & Large Cars, 8.3%

Luxury & Sports Cars, 6.4%

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Luxury SUVs

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Non Luxury SUVs


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SUV CLOSE UP

Toyota is Top Selling Non-Luxury SUV Brand

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

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.

Toyota was the best-selling non-luxury SUV brand

Small SUVs were higher for Toyota and Jeep.

Ford Mid Size and Large SUV registrations exceeded Small SUVs.


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

Note: Small SUVs consist of subcompact and compact models.

Lexus was the best-selling luxury SUV brand

Small SUVs were higher for BMW.


Review of Regional New Vehicle Markets in Nevada

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

Carson City (Carson County) 903 895 -0.9% 76.6 80.8 4.1 18.1 9.6 7.9 4.9 9.1

Elko (Elko County) 1,135 1,034 -8.9% 88.2 88.7 0.5 25.6 11.2 1.6 23.3 1.0

Las Vegas (Clark County) 39,307 33,741 -14.2% 61.9 66.3 4.4 16.2 11.3 8.1 9.1 7.2

Reno (Washoe County) 8,132 7,324 -9.9% 73.6 79.7 6.1 16.3 8.3 5.5 4.3 7.2

0.0 5.0 10.0 15.0 20.0 25.0 30.0

Kia

Ram

Nissan

Subaru

Jeep

Hyundai

Ford

Honda

Chevrolet

Toyota

Carson City Elko Las Vegas Reno

YTD SHARE FOR TOP 10 BRANDS

Regional Market Share (%) for Top 10 Brands in State Top Five Sellling Models in Regional Markets

Based on New Retail Light Vehicle Registrations

YTD 2020 thru JuneCarson City

1 Ram Pickup2 Chevrolet Silverado3 Toyota RAV44 Subaru Forester5 Subaru Outback

Elko1 Ford F-Series2 Ram Pickup3 Toyota Tacoma4 Chevrolet Silverado5 GMC Sierra

Las Vegas1 Ram Pickup2 Chevrolet Silverado3 Ford F-Series4 Toyota RAV45 Toyota Corolla

Reno1 GMC Sierra2 Ram Pickup3 Toyota RAV44 Chevrolet Silverado5 Toyota Tacoma

BEST SELLING MODELS

Toyota share in Elko County was 25.6%.

Subaru share in Reno was 15.7%.




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.

Brand Registrations ReportNevada New Retail Car and Light Truck RegistrationsSecond 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

TOTAL 27,275 21,134 -22.5 53,704 46,874 -12.7

Cars 9,190 6,071 -33.9 33.7 28.7 -5.0 18,263 13,792 -24.5 34.0 29.4 -4.6

Light Trucks 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 0.1Source: AutoCount data from Experian.

Documents

Covering Second Quarter 2020 Volume 2, Number 3 Nevada