Pandemic's Impact on U.S. Car Sales Won't Be Small: Morgan Stanley
This won’t be the last prediction you read that erases millions from the United States’ 2020 new vehicle sales tally.
Morgan Stanley now says the rapidly growing COVID-19 pandemic (the World Health Organization declared it one midday Wednesday) will send auto sales tumbling at a far steeper rate than initially forecasted. At the beginning of the year, of course, no one had heard of this illness.
As reported by Reuters, Morgan Stanley analyst Adam Jonas wrote in an investor note that the industry will close out the year with sales down 9 percent. That’s about 15.5 million units sold, versus the nearly 17.1 million new vehicles purchased in 2019.
Before the coronavirus outbreak hit China, and subsequently the world, the National Automobile Dealers Association predicted that this year’s U.S. sales would come in around 16.8 million. A modest cooling trend had been on the radar for years; this pandemic, however, came out of left field.
After bouncing around after reaching a record high of 17.55 million in 2016, U.S. auto sales fell roughly 1.6 percent, year over year, in 2019, but stayed north of 17 million — a somewhat unexpected result. While this year was expected to come in below 17 million, no one was expecting a figure below 16 million. Yet the quarantine and “social distancing” measures coming into effect right now all but guarantee a period of significantly depressed auto sales in most regions. How long those periods will last, and how long the pandemic will last, remains uncertain.
Unpredictability abounds. However, in 2021, Jonas wrote, the industry should recover somewhat to about 16 million units.
[Image: welcomia/shutterstock]
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Yes the corona virus does have an effect on sales of new vehicles but at some point sales were going to slow down. I am sure there will be some deals on new vehicles but then the supply of new vehicles at some point will be limited due to parts shortages especially parts from China. I will not be buying any vehicles in the near future regardless because I don't need any and all my vehicles are not that old and have low mileage. I don't really need anything and if anything I will be downsizing and getting rid of things since I will be retiring in less than 2 years and will eventually move to a warmer climate.
There are also going to be some phenomenal used car values coming up. A quick look at my local Avis Car Sales site shows a ton of MY2019 vehicles with 24K-32K miles. Example 2019 Jetta, Corolla for $13K+, 2019 Fusion Hybrid for $15K. I expect those prices to go lower and/or have 0% financing offers soon.
Those are good deals especially a Fusion Hybrid for 15k. Fusions are good cars it is a shame Ford is discontinuing them especially since the tooling is already paid off.
If the tooling were worn out then I agree, but I doubt Ford would loose any money on a regular Fusion if the tooling is not worn out especially since many are made in Mexico. It is not so much that Ford would lose money on the Fusion as much as Ford can double their profits on pickups, crossovers, and suvs. Eventually people will tire of trucks and truck like vehicles and GM, Ford, and FCA will be asking for a bailout. I am not as sympathetic about giving the car companies another loan but I am willing to bet the Government will bail them out. I doubt I will buy another Big 2 1/2 made vehicle. If I am going to buy a new vehicle made with mostly Chinese parts or Chinese made I will wait for the Chinese companies to enter the US market and get one for thousands less meanwhile I will buy a Honda, Toyota, Kia, or Hyundai. There is always room in the market for more affordable vehicles which Detroit seems to be getting away from.