The California New Car Dealers Association (CNCDA) recently published its 2023 California Auto Outlook report, shedding light on automotive industry trends and a surprising shift in electric vehicle demand throughout the second quarter. On this episode of Inside Automotive, host Jim Fitzpatrick is joined by Brian Maas, president of the CNCDA and the 2023 chairman of the Automotive Trade Association Executives (ATAE), to discuss some of the outlook’s findings and what they can tell dealers about the automotive industry.
California is one of the most dynamic car markets in the country. Many of the trends affecting the automotive industry originated in the state, making it essential to track the work of CNCDA to stay ahead of the curve. “The auto market is one of constant change,” remarks Maas. “Our sales increased year-to-date…almost 12%. So as inventory numbers continue to go up, that provides more choice for consumers and more opportunities for dealers to sell more vehicles, and we’re seeing that reflected in the numbers.” The CNCDA now expects its dealers to sell 1.8 million new vehicles in 2023. While this number is still behind pre-COVID sales numbers, it is much closer to the region’s normal pace of 2 million, especially compared to 2022 and 2021.
One of the biggest upsets for the automotive industry in the second quarter was the success of Tesla and a surge in electric vehicle popularity. “It’s pretty hard to ignore, the top two selling vehicles in California were Telsas, and by large margins,” comments Maas, although he notes other brands have also seen success in the EV segment. Demand for battery-powered cars has increased so much in the state that the CNCDA is now reporting an EV market share of 21%, the highest in the nation.
While Tesla has seen a sizeable increase in sales, it is facing a problem of its own creation. “Candidly, and I think even Elon Musk would admit this, the Model 3 and Model Y, their top two selling vehicles, are pretty stale,” remarks Maas. “They’re gonna need to freshen up their product mix before the vehicles our dealers sell are gonna pass them by.” Dozens of new models from competing brands will be launching in the coming years: the more outdated Tesla’s lineup becomes, the more customers will turn to CNCDA dealers. Over time, the brand may need to adopt similar strategies to other automotive industry brands to continue driving value for shareholders. In some ways, this transition can already be seen in how the company is looking to boost sales through price discounts after enjoying years of high profit margins.
CNCDA has traditionally seen a high number of leases in the region, which Maas attributes to its large luxury segment as well as the popularity of German and Asian imports. “Couple that with some of the interpretations of the Inflation Reduction Act and what manufacturers can qualify for which credits, it makes leasing very attractive for consumers that want to take advantage of a potential rebate that might be offered to them,” he adds. “I think we’re gonna see leasing penetration continue to grow in California.”
Overall, the second quarter was a successful period for the state’s dealers. The trends the CNCDA has tracked, especially in regard to electric vehicles, may soon begin to spread to other parts of the country. However, as dealers know, nothing is ever certain in the car business. Staying on top of new and updates from organizations and associations is the best way to stay prepared against market shifts.