The California Motor Car Dealers Association recently announced that 2007 was the worst year for the California automotive market since 1999. In its quarterly California Auto Outlook newsletter, the CMCDA noted that a number of economic events in the past year have contributed to the decline, including extremely tight credit markets, rising unemployment, falling housing values, excessive consumer debt, slowing economic growth, and high gas prices.

California Auto Outlook projects that California new car and light truck registrations will decline 4.0 percent from 2007 to 2008, with the total just exceeding 1.8 million units. This follows an 8.2 percent drop from 2006 to 2007. Registrations last year were the lowest since 1999, when 1,861,671 new vehicles were registered in the state.

Despite the decline, the CMCDA believes there are a few reasons why the market is not headed for a collapse. Consumer affordability for new vehicles remains at very respectable levels, while lower interest rates, aggressive pricing, and personal income gains should help keep a new vehicle purchase a viable proposition for consumers. In addition, the CMCDA says economic conditions are expected to improve somewhat during the second half of 2008.

The CMCDA also expects the market will pick up 2009, citing the combination of rising replacement demand (i.e., an aging vehicle fleet) and new, emerging powertrain technologies for motivating factors for consumers to enter the new vehicle market. The CMCDA also notes there is a strong possibility that registrations could reach the 2 million unit mark within two years.