California Cars: Supply Slows, As Prices Head In The Fast Lane – Capitol Weekly | Capitol Weekly



Several factors shape the demand, prices, sales and supply of new and used cars in the Golden State, but consumers know one thing: their wallets are taking a hit.

Jessica Caldwell is the executive director of Edmunds, based in Santa Monica. “There has never been a greater imbalance between supply and demand for vehicles like there is now across the country, including the country’s largest auto market, California,” she said. .

According to one estimate, new car prices rose 12.1% between September 2020 and September 2021, or about $ 4,871 per vehicle. The average cost of a new car exceeded $ 45,000, a historic first.

California Auto Outlook for Q2 2021 predicts new car sales could increase 15% from 2020, approaching 1.9 million units

Lewis Black is Director, President and CEO of Almonty Industries, a global raw materials development company that extracts tungsten, a critical material in electronics and semiconductors. He agrees with Caldwell’s assessment of the low supply and high demand in the California auto market.

“This is a classic example of supply squeeze,” says Black. He explains why. “The production of automakers is down due to the shortage of auto parts in semiconductors and polymers. “

Brian Maas heads the California New Car Dealers Association. “Every new car contains thousands of computer chips,” he says. “There are some global companies in countries like South Korea and Taiwan that make these chips. The United States was an industry leader some 20 years ago before companies relocated this production overseas. This led to a discussion in Congress about returning computer chip production to the United States. “

The California Auto Outlook for the second quarter of 2021 predicts that new car sales could increase 15% from 2020, to approach 1.9 million units. For the first two quarters of 2021, there was a 35.1% increase statewide.

The increase in new car sales has varied by region, according to the CAO. “Southern California led very slightly with 35.3% against 34.9% for Northern California. Specifically for the selected markets, San Diego County saw an increase of 35.2%, LA and Orange counties an increase of 32.9%, and the Bay Area a 29.7%.

Such turmoil in the market for demand, prices and supply comes after 20 months of the COVID-19 pandemic.

Meanwhile, a global chip shortage that has driven down the supply of new cars is also affecting the used car market. Used vehicle salespeople are well placed. Credit the increased demand for used cars, according to Caldwell.

“This imbalance between very limited inventory and growing demand has caused new and used prices to skyrocket to levels never seen before in either market,” she said.

Such market turmoil over demand, prices and supply comes after 20 months of the COVID-19 pandemic, with school closings and layoffs hammering the Golden State economy. There is a positive side to post-pandemic shutdowns. For example, pent-up demand to travel as vaccination rates rise in the Golden State, with the 5-11 age group recently becoming eligible for the Pfizer vaccine.

“Consumers were eager to get back on the road as pandemic restrictions eased and schools, businesses and workplaces reopened,” Caldwell said. Such a trend increases consumption which fuels economic growth.

It’s good for the seller, not so much for the buyer. Price increases can stimulate inflation, which can undermine purchasing power.

An unresolved pandemic trend is supply chain congestion at west coast ports. When the resolution comes, prices for new and used vehicles are expected to drop, other things being equal.

At the State Capitol, the California State Assembly and Senate held a joint information hearing on November 4 to address congestion at the ports of Los Angeles and Long Beach, seeking solutions now and later to this crisis.

Meanwhile, price increases for new and used cars are having uneven impacts on Californians.

Amir Daneshvar is the general manager of Zen Auto in East Sacramento. “The big dealers have financial capital and can control the market by buying available inventory,” he says, “like a monopoly. When they have the majority of the inventory, they can dictate the selling price as the new standard. “

Small car dealerships cannot compete with the bigger ones in terms of inventory or price. There is another factor that drives up car prices, according to Daneshvar. “We also have the new cars that are more advanced and cost more to produce,” he says. “In turn, they are more expensive. “

It’s good for the seller, not so much for the buyer. Price increases can stimulate inflation, which can undermine purchasing power.

Meanwhile, shopping online or in a parking lot, a personal characteristic can help shoppers cope.

“When consumers buy a new or used car and find that there is a limited selection of models and features,” says Maas of the California New Car Dealers Association, “they will have to be patient. “

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