Sailing Into a Storm: 2020 Sales Predictions Grow Even Leaner

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:

LMC is coming out w/ our revised forecast & we will be at 14.2mn units in the US for 2020, w/ further risk of 1-1.5mn units. At this stage, we don't see going as low as 2009. Global outlook will be out later today with the significant cut in the outlook exceeding 12mn units.

— Jeff Schuster (@jwschust) March 25, 2020

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]