Why politics could be affecting car sales in California

Inflation and high interest rates are weighing down sales of new cars and trucks across California, but some industry analysts and dealers suspect another factor is quickly coming into play — anxiety about the upcoming presidential election.

“In my experience, when there’s uncertainty in national or international or state politics, people delay,” said Brian Maas, president of the California New Car Dealers Association. “They want to see how it all turns out (before making a purchase). And since most people are going to own their cars for many years, waiting six months or so is not a horrible thing to do.”

Ivan Drury, director of auto insights at Edmunds.com, agrees — especially since the average price of a new vehicle in the U.S. has climbed to nearly $48,000.

“At the price points we’re looking at and the uncertainty that consumers have about what’s going to happen, I think a lot of people are just going to be on hold,” Drury said.

Tensions in an already polarized political environment are rising after the assassination attempt on Donald Trump and calls from some Democrats for President Joe Biden to withdraw from the race after his performance at the June 27 presidential debate.

Numbers released Thursday by the state’s new car dealers show sales in the first half of the year are down 0.7% compared to the first six months of 2023.

The association projects registrations for new cars and trucks in the state will come to 1.8 million for the year, compared to 1.77 million registrations in 2023.

“The market is relatively flat — not a ton of growth but no real steep declines,” Maas said.

The rate of inflation has slowed but overall, prices throughout the economy are still high and so are interest rates.

Four years ago, car and truck buyers did not have to look hard to find dealers offering interest rates at rock-bottom percentages. Today, rates typically hover around 7 percent. On a 60-month lease, that can translate to customers paying about $200 more per month just because of higher financing costs.

Stagnant sales also affected electric vehicles. The market share of EVs across California remained virtually the same compared to the first two quarters of 2023 (21.4 percent for the first two quarters of this year and 21.5 percent last year).

The market share for plug-in hybrids did not budge at all — 3.4 percent for the first half of 2023 and 2024.

However, the market share of hybrid vehicles without plugins increased 2.1 percent compared to last year, rising to 13.2 percent.

These so-called “traditional hybrids” rely on the car’s electric motor when operating at low speeds and then shift to the internal combustion engine when additional power is needed. Since the car relies on the engine, drivers of hybrids without plugs don’t have to worry about getting to a charging station before the car conks out.

“A traditional hybrid is definitely the easiest thing to live with because you don’t change anything in your lifestyle,” Drury said.

However, hybrids without plugs do not count toward Gov. Gavin Newsom’s executive order that mandates the elimination of all new sales of gasoline-powered passenger vehicles in California by 2035. Plug-in hybrids, EVs and hydrogen fuel cells meet the mandate.

The all-electric Tesla Model Y remained the top-selling vehicle in California in the first two quarters of the year.

But the sales of all Tesla vehicles dropped 17%. The decline may be attributed in part to the increasing number of EV offerings from different automakers that customers can choose from, thus eroding Tesla’s dominance in the clean car market.

Drury also suspects other factors may be at play, such as Tesla founder Elon Musk increasingly speaking out on political topics.

“You have Tesla being associated with things that are not even automotive-based,” he said. “People talk about General Motors and bailouts, and they try to politicize that, but I don’t think that gets nearly as much play as anything that comes out of Elon Musk’s mouth.”