New car sales in California down for 2022 but electric vehicles sales move into overdrive

New car and truck sales in California fell 10.2 percent in 2022 as supply chain issues and a shaky economy put a damper on customer demand. But at the same time, registrations for electric vehicles and hybrids continued to accelerate, accounting for almost one-third of the new vehicle market.

The two top-selling vehicles for the year were electric cars — the Tesla Model Y, the car maker's entry in the SUV space that accounted for 87,257 registrations, and the Tesla Model 3 that recorded 78,934 deliveries. It marks the first time that electric vehicles, or EVs, finished 1-2 in California year-end sales.

"It is staggering to see this rate of increase for EVs," said Ivan Drury, senior manager of auto insights at Edmunds.com. "You just don't see that anywhere else in the country. While other places might see numbers going up, this steep of a curve for the adoption rate of EVs is just very telling about how California compares versus the rest of the United States."

According to year-end figures from the California New Car Dealers Association, all-electric vehicles such as the Model Y and the Model 3 made up 17.1 percent of the new car market in California, hybrids accounted for 11 percent and plug-in hybrids made up 3 percent.

Added together, that comes to 31.1 percent of the market share of new auto sales in the state in 2022 came from zero- or low-emission models. That's up from 23.4 percent in 2021.

Former Gov. Jerry Brown in 2018 set a goal to have 5 million zero-emissions vehicles on California roads by 2030. At the end of 2022, the state counted nearly 1.4 million.

"I think familiarity has become key with a lot of consumers," Drury said. "They used to ask, am I an early adopter driving an experimental car? No, you're kind of mainstream now ... It's like all the things that could stop you from buying, those barriers to entry, they're coming down."

But overall, 2022 proved to be a tough year for California car dealers, with registrations falling from 1.86 million in 2021 to 1.67 million.

The 10.2 percent dip was actually higher than overall national numbers that saw U.S. sales down 7.9 percent for the year.

Inflation is eating into the earnings of potential buyers and the days of zero-percent interest rate on vehicle purchases have vanished.

"The new car interest rate, on average in January, is 6.9 percent," Drury said. To finance a $40,000 car, "that's $8,700 in finance fees alone."

The average price of a new car rose in December to an all-time high of $49,500, according to Kelley Blue Book.

"I think all that tempers the ability of a lot of consumers to enter the market," said Brian Maas, president of the California New Car Dealers Association. "They say, You know what? I'm going to postpone looking at a new car for a little bit and see if this economic uncertainty rights itself."

In addition, supply chain issues have continued to keep inventory low.

Auto makers have been struggling with a global shortage of semiconductor microchips that has dragged on for 21 months, leaving dealers' lots looking bare. 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.

"You go to any dealer in San Diego, or anywhere throughout the state, and you look around and there are lots that still aren't full yet," Maas said.

Initially, the lack of inventory heated up the used car market as buyers who couldn't get new vehicles eagerly snapped up used cars and trucks with low mileage on them. In some cases, that led to a weird phenomenon in which gently-used vehicles commanded prices that were actually higher than brand new models.

But by the latter half of 2022, the fever appeared to break, and used car sales finished the year off 15.5 percent.

"We're starting to see some price stabilization but in certain pockets of the used car market prices are still pretty high, so I think the picture's a little mixed," Maas said. "Interest rates also affect the used car market, too ... and if your interest rate is roughly double in 2023 what it might have been in early '22, you might say, I'll get my current car fixed and I won't go out and get a replacement."

The California New Car Dealers Association expects slightly more sales this year, projecting a 5.4 percent increase to 1.76 million registrations. Prior to the pandemic, auto sales in the state surpassed 2 million units a year for four straight years (2016 through 2019).

"If the supply chain issues right themselves and there's robust price competition returning for a lot of brands, makes and models, then you can see the sales numbers go up because there will be price competition," Maas said, "and consumers will want to enter the market when they think they can get a good deal."

Top-selling vehicles in California in 2022

1. Tesla Model Y 87,257

2. Tesla Model 3 78,934

3. Toyota RAV4 59,794

4. Toyota Camry 55,967

5. Ford F-Series 40,232

6. Toyota Corolla 39,865

7. Chevrolet Silverado 38,601

8. Toyota Tacoma 38,306

9. Honda Accord 32,605

10. Honda Civic 31,867

Source: California New Car Dealers Association/Experian

This story originally appeared in San Diego Union-Tribune.

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