New vehicle demand soared to a new all-time high in May, as more Americans, particularly those living in urban areas, turn to cars over public transportation and ride-sharing services amid concerns about contracting the coronavirus, according to the latest reading of TechnoMetrica’s Auto Demand Index, a monthly measure of Americans’ intent to acquire new vehicles in the next six months. As a result, automakers and dealers should prepare for strong pent-up demand for new vehicles once the economy reopens.
TechnoMetrica Market Intelligence developed the Auto Demand Index, or ADI, as a way to measure the intent of consumers to buy or lease a new vehicle within the next six months. The ADI, which is conducted monthly, is based on the response to a key question posed to more than 1,200 adult Americans: How likely is it that you will buy or lease a new vehicle within the next six months?
The Auto Demand Index climbed 44 points, or 32.4 percent, this month, to a reading of 180.0, the highest score since TechnoMetrica began tracking the measure in February 2007. This marks the second straight month in which the index has reached a record high, as coronavirus lockdowns continue to compel many potential buyers to delay their vehicle purchasing plans. Further highlighting the recent surge in pent-up demand amid the coronavirus crisis, the May index is 76 points above the reading of 104 recorded in March, when U.S. states began implementing lockdown measures.
The boom in new vehicle purchase intent is widespread, our survey shows. In May, 25 out of the 26 demographic groups that TechnoMetrica monitors each month posted gains in the index, compared with 21 in April and 22 in March. Also, 15 groups set record highs this month.
Among regions, the Northeast has displayed the sharpest growth in new vehicle demand over the past few months. Between March 2020 and May 2020, the Northeast has seen a 45-point gain in the index’s three-month moving average, from 110.0 to 155.0. Meanwhile, the West has posted a 38.2-point gain, from 110.8 to 149.0, the South has seen a gain of 33 points, from 106.6 to 139.6, and the Midwest improved by 16.1 points, from 103.8 to 119.9.
In terms of area type, purchase intent has grown fastest among urban residents, climbing 85.8 points between the months of March and May, from 116.1 to 201.9. In comparison, suburban areas posted a 12.2-point gain during the same period, from 103.8 to 116.0, while rural America saw an 8-point decline, from 106.8 to 98.8.
The surging demand for new vehicles among urban areas suggests that many city dwellers are opting to embrace individual car ownership over concerns about catching the coronavirus on public transit or ride-sharing services.
Structural Changes in Preferences
Urban residents’ growing appetite for cars is further reflected in a notable shift in overall consumer preferences away from larger vehicles such as SUVs and pickups towards smaller types. When asked which type of vehicle they plan to acquire for their next new vehicle purchase, one in five (20.4 percent) likely buyers cited a compact car, followed by a mid-size car (17.1 percent), a sub-compact or MINI car (11.6 percent), a small SUV (11.5 percent), and large SUV (10.9 percent). Back in March, small SUVs and large SUVs topped the list, at 20.5 percent and 19.5 percent, respectively, followed by pickup trucks, at 15 percent.
Our research also reveals a growing shift to luxury vehicles, perhaps driven by urban demand. Nearly two in five (37.1 percent) likely buyers would prefer a luxury vehicle as their next new auto purchase, the largest share on record, up from 32.8 percent in April and 14.7 percent in March. Meanwhile, demand for non-luxury vehicles stood at 59.4 percent, compared with 62.9 percent in April and 76.9 percent in March.
Positive Momentum Ahead
Looking ahead, TechnoMetrica expects new vehicle demand to remain in an upward trend in the near term. The index lingers above all three moving averages (three-month, six-month, and 12-month), each of which posted gains in May. Also, our indicator for momentum, the MACD, more than tripled over the past month, from 3.4 in April to 11.4 in May, the highest on record.
Automakers and dealers should anticipate a rush of likely vehicle buyers in the immediate future, especially as states begin to reopen their economies. This month, close to one in five (17.9 percent) respondents who say that they are likely to acquire a new vehicle in the next six months plan to do so within the next one month, down slightly from 19.6 percent in April, but higher than the 11.5 percent share from March. On average, likely buyers plan to acquire a new vehicle within 3.46 months, down from 4.07 months in March.
The Auto Demand Index is compiled from an online survey of 1,225 U.S. adults fielded from April 26 to April 29.