By on March 25, 2020

Everything seemed hunky dory after the New Year’s celebrations wrapped up and all the party hats and disposable drink cups were swept from the floor. Unbeknownst to the auto industry, however, the ship was heading into a sea roiled by a storm no one saw coming. Now, with the first quarter of 2020 almost in the rear-view, the radar mast is overboard, the bilge pumps are running non-stop, and the crew can only guess when the skies will clear.

The impact of COVID-19 on U.S. auto sales is far from set in stone, but the best-guess picture is becoming clearer. Clearer, and worse for the industry.

Earlier this month, Morgan Stanley analyst Adam Jonas foresaw a 9-percent drop in U.S. sales, translating into 15.5 million transactions. Last year saw 17.1 million new vehicles roll off lots. LMC Automotive was more conservative, predicting a more modest 3-percent drop to roughly 16.5 million units. Globally, the firm said, new vehicles sales would fall 4 percent.

Elsewhere, RBC Capital markets predicted the big sales increase seen last year at Tesla would invert itself, with overall sales falling — despite the introduction of the Model Y crossover. Ford will post a full-year loss, it added, with General Motors burning through $3.5 billion — and that’s after eating a couple billion during last fall’s UAW strike.

Liquidity levels are strong within the industry, something that will help OEMs weather the storm. Some automakers, most notably Ford and GM, have tapped credit lines to bolster their financial position.

As the pandemic grows in the West, predictions that were already pared back from start-of-the-year crystal ball sessions are getting further haircuts. Wednesday morning brought the latest:

At the height of the recession, U.S. auto sales plummeted, falling to 10.4 million for calendar year 2009. So far, it doesn’t look like we’ll return to those depths; 14 million translates into 2012 figures, but too much uncertainty exists in the market to be sure of anything at this point. It’s a wait and see game.

Even if  the U.S. economy is reopened for business come Easter, that doesn’t mean long lineups outside the dealer. Lessees at the end of their term will need new wheels, sure, but job and health uncertainty, coupled with a very contagious viral outbreak that won’t disappear the moment store lights come on, will certainly impact spending habits.

[Image: Joerg Huettenhoelscher/Shutterstock]

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11 Comments on “Sailing Into a Storm: 2020 Sales Predictions Grow Even Leaner...”

  • avatar
    SCE to AUX

    So he’s predicting ~25% sales loss at worst? Could be. But we’ll also see a couple of CV resurgences after people go out again. It will take a long time to feel confident and trust the person next to you.

    How are people buying cars right now – online? One local dealer offered this, but I keep hearing ads for great deals on vehicles with no explanation as to how to actually buy them.

    • 0 avatar
      bumpy ii

      I’ve heard a few ads with a quick, almost-throwaway line about online ordering and home delivery.

      • 0 avatar
        SCE to AUX

        I know there are mixed feelings about dealers around here, but personally I’d prefer an online buying experience.

        One idea I had: The dealers could offer a $100 discount to those customers who waive the test drive. Test drives mean the car has to be disinfected and someone needs to fetch it, so it could make sense to cut the price a little if the dealer just has to deliver it.

        Maybe the CV will permanently change the car buying process.

        • 0 avatar
          bumpy ii

          Letting the car sit in quarantine for five days would more than suffice for C19 purposes. A dealer with some sense for innovation could make a 10-15 minute inside-and-out video plus a brief test drive for general sales purposes (a few do this already), and arrange for a livestream virtual test drive with particular prospective buyers. Most dealerships are explicitly devoted to *not* innovating the sales experience, so I don’t expect to see much of that. At first.

  • avatar

    The duration of this pandemic depends on how effective a society will be at reducing spread and increasing health care capacity to cope with the gradual relaxation of distancing measures.
    Worst case predictions are up 30% unemployment. That group isn’t going to be buying new motor vehicles. Those who aren’t in that group are still scared and also are unlikely to buy new.

  • avatar

    “ Liquidity levels are strong within the industry” — sure they are, just look at that robust corporate bond market…

    Same story, different decade. Debt-fueled “wealth” used to buy debt-financed products like a snake eating its tail.

  • avatar

    Fire those analysts, unless you have data that shows that 2008 crash resulted in 30% unemployment that we will have this year. I am returning my lease in May, my wife and her whole team are already fired. I might look at cars in October just to see how good the discounts are. I might not be able to resist then from getting a new car.

  • avatar

    For most workers this situation is downright horrible:

  • avatar

    I’ve been trying to see if I can get a good deal on a 2019 Mustang. The dealers in Atlanta are not budging. Still playing their silly games.

  • avatar

    Been looking at buying a used car (3-5 years old. So far still not much movement on prices but some dealers have started offering to drop off cars to your house for test drives or delivery. I think it’s too soon for them to try and dump inventory but it depends on how it looks. I know on the wholesale side auction sales are way off plenty off cars running the block but none hitting reserve price. So dealers seem to be trying to dump inventory on the wholesale side but no ones buying. I heard a rumour the local car max auction was so bad they took a loss on almost every car they sold. I said the other day I expect if sales are still bad going into this weekend I expect prices to start moving down.

    I’m still looking for a car but only halfway as this stuff plays out. My job is considered essential but if the infection rolls thru there is still a chance of shutdowns.

  • avatar

    People I know are all home, some are still working if the job lends to telecommute. If you aren’t an information worker, you are in trouble….a family member who is a hotel manager was just furloughed for two months, off to the unemployment office…and this is someone with a perfect work record and history of promotions. The SAAB 900 they were going to replace, now isn’t being replaced…..

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