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Forecasting Natural Demand: Powering the US Auto Market After COVID-19

Executive Summary

As the auto industry began to view the Great Recession in the rearview mirror and looked ahead to reinvigorated new vehicle sales, one question kept being asked: How long will the growth in sales last? In this Thought Report, ALG tackled this question by addressing the concept of pent-up demand from deferred sales during the recession and in the process explored a concept we call “Natural Demand”.

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Below is an interactive Natural Demand Simulator for 2020 - 2023. At the bottom of the visual, you can update any of the key assumptions that drive natural demand for the U.S. car parc to see how imbalances in supply and demand will evolve. Metrics are limited to reasonable historical levels as it generally takes time for an entire population to change its habits.

Explore your own assumptions to see how different metrics will influence natural demand and new sales moving forward.

Here are some potential scenarios to consider while adjusting forecast demand:

  • Update New Sales to see varied sales outlooks for slow or quick recoveries.
  • Scrappage often goes down in economic downturns as people hold on to cars longer but the proliferation of the transportation and delivery gig economy could lead to high scrappage on high use vehicles.
  • Licensed Drivers Rate and Cars per Driver could shift as more transportation options become available from rideshare to increase public transit options. Another factor that may impact US driving driver habits could be increased work from home jobs post COVID-19.

Use the button at the bottom of the widget to reset back to the ALG baseline assumptions.