Despite high prices and steeper interest rates on car loans, auto sales in San Diego County are up 9.2 percent.
Statewide, the numbers are even better — with registrations for cars, trucks and SUVs 14.3 percent higher compared to the same time last year.
In its third quarter report, the New Car Dealers Association of San Diego County attributed the strong showing to pent-up demand in the wake of the financial effects of COVID-19 as potential buyers look to replace vehicles that are getting worn out.
Plus, household incomes are strong.
A recession “is still a possibility and affordability has weakened,” the report said, “but the unemployment rate is low and wage growth is steady.”
The average price for a new vehicle in the U.S. in September came to $47,899 according to Kelley Blue Book.
Top Selling Models in San Diego County
Registrations through September
1. Tesla Model Y 9,112
2. Tesla Model 3 5,526
3. Toyota RAV4 3,794
4. Honda CR-V 2,974
5. Honda Civic 2,784
6. Toyota Tacoma 2,655
7. Honda Accord 2,309
8. Toyota Camry 2,291
9. Chevy Silverado 2,247
10. Ford F-Series 2,121
Source: Experian Automotive/New Car Dealers Association of San Diego County
Due to inflation, interest rates are rising. Car loans at zero percent, in practical terms, are a distant memory, with lending rates typically in the 7 percent range or higher.
Ivan Drury, senior manager of auto insights at Edmunds.com, said financing a $40,000 purchase at 7.4 annual percentage rate (APR) can typically translate to spending more than $9,000 in interest over the life of the loan.
“That’s a hefty sum of money,” Drury said.
Despite all that, vehicle sales in San Diego are at their highest percentage since the pandemic scrambled the auto landscape.
This year’s two best-selling models are electric vehicles, or EVs.
The Tesla Model Y, a midsize SUV, accounted for 22.2 percent of the market share of vehicles sold in San Diego County through the third quarter of this year. Tesla’s Model 3, marketed as a more affordable EV, finished second in sales, accounting for 13.5 percent of market share.
It’s the same story statewide, with deliveries of the Model Y and the Model 3 finishing 1-2 in registrations for the first three quarters of this year. The Toyota RAV4 finished third.
“For people who can afford to buy a new car, they’re buying them,” said Brian Maas, president of the California New Car Dealers Association.
The strong numbers come even though traditional automakers recently announced setbacks on EV production.
Last month, Ford said its plans to make 600,000 EVs annually have been pushed back to late 2024. The company has also temporarily cut one of its production shifts for its electric pickup and paused the construction of a $3.5 billion battery plant in Michigan.
General Motors last week delayed opening a large EV truck factory in Michigan by one year, citing a need “to better manage capital investments while aligning with evolving EV demand.”
Tesla recently reduced the prices of some of its Model 3 and Model Y versions after the company reported third-quarter deliveries that missed market expectations.
“As we get consumers who are everyday people looking into this, you’re not going to get that aggressive level of EV adoption at the same rate forever,” Drury of Edmunds said. “I think it’s a reality check … It’s not like we’re going to stop selling EVs, because there’s some very compelling products out there. It’s just that other realities are settling in.”
On the positive side, the effects of a global shortage of semiconductor microchips that has dragged on for nearly two years appear to be easing.
The silicon chips essential for laptops, game consoles and TVs also go into the brake sensors, power steering, navigation and entertainment systems in modern-day vehicles.
Analysis by S&P Global Mobility estimated more than 9.5 million units in sales were lost in 2021. But during the first half of this year, losses due to the chip shortage fell to about 524,000 units globally.
“We are now in a position where the auto industry has adapted to a constrained supply, and as a result is much less likely to be hit by significant disruption,” Mark Fulthorpe of S&P Global Mobility said in July.
New car sales for California are projected to reach 1.8 million — the highest figure since 2019, before the onset of the pandemic.
“We expect to do a little better in ‘24,” Maas said. “I think we’re getting close to that 1.9 million, 2 million, 2.1 million equilibrium (for vehicles sold) that we had for most of the last decade and that’s a good sign for our market.”
Larger new vehicle inventories have led to a decline in used car sales. So far this year, the numbers have dipped 5.4 percent in San Diego County and 5 percent statewide.
