Where Does the Industry Go From Here?

Steph Willems
by Steph Willems
where does the industry go from here

With all domestic assembly plants shuttered for some length of time and sales barreling towards zero in many markets at the end of March, the coming few months could play out in a number of ways. Sure, no crystal ball can be expected to return bang-on predictions, but that’s not stopping analysts from crafting a number of plausible scenarios.

As projected by J.D. Power, April looks like a wash for new vehicle sales, but the recovery could be more rapid than some fear. Or, just as easily, it might not be.

In a Wednesday webinar, the firm’s data and analytics gurus laid out the range of possibilities. With the month of March already showing a 43-percent year-over-year drop in U.S. retail vehicle purchases (a 37-percent decline over the pre-virus forecast for the month), J.D. Power sees near-blanket stay-at-home orders suppressing April sales severely.

Compared to the pre-virus forecast, April looks to undercut that earlier total by 80 percent. Between March and July, the firm predicts a volume loss of 1.6 to 2.4 million sales — enough to sink 2020’s full-year total by 10 to 30 percent.

We’re entering “a period of extraordinary uncertainty,” said Thomas King, president of J.D. Power’s Data & Analytics division. Key factors include exactly when state-level stay-at-home orders lift, and the economic environment that exists in the U.S. “after people are allowed to go back into showrooms.”

King says it’s unlikely governments and OEMs will be able to stabilize the sales situation via stimulus measures, meaning the industry won’t be back to pre-virus levels until next year.

But back to the coming few months. J.D. Power mapped out three scenarios: a low-impact scenario, a moderate one, and a severe case. In May, the low end of the range shows sales down 30 percent compared to the pre-virus forecast. The moderate scenario calls for a 42-percent drop over the previous forecast. A worst-case situation spells a 68-percent drop — hardly a rebound from April’s 80-percent drop.

June is another story, with the range running between zero and 18 percent (8 percent in the moderate scenario). Come July, only the worst-case projection shows any drop below the pre-virus retail forecast, and that’s only by 5 percent. Time will tell, though the firm says, at least for full-year sales, that the lower end of the volume range seems the more likely bet. That means the industry is on track to fall closer to the 12.1 million projected full-year sales, rather than somewhere near the 14.8 million mark.

One thing waiting to assist automakers and dealers is the 1.8 million Americans whose leases expire between March and July.

The punchline to all of this, King said, is that there’ll be no inventory constraints when dealers reopen. Strong pickup demand seen in March — despite a huge overall industry drop — will likely make that segment a priority when plants come back online, King added.

[Image: General Motors]

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  • Jerome10 Jerome10 on Apr 02, 2020

    Where does the industry go from here? Probably to DC to ask for a bailout like every other company on the planet.

  • Whynotaztec Whynotaztec on Apr 02, 2020

    first order of business for GM should be to at the very least redesign the mirrors on the HD trucks - that should be quick and easy. Oh and have an adult do the design.

  • Arthur Dailey So they cut the roof off the hatch area of a Dodge Journey?
  • Desertwanderer Across Australia, from Sydney to Perth, via the Nullarbor Highway. Desolate, very impressed to pass a bicycle tourist somewhere in the middle, I think he'd have a story to tell. Oh, and the Cabot Trail, Cape Breton, NS, in my S4.
  • Cprescott Please stop production of all Camry's - they are hideous and vomit inducing ugly.
  • Cprescott Excellent! Complete garbage.
  • Kos65701744 A lot of people back then didn't like the downsizing idea, which is why some didn't sell better than before. Which is why in final gen sales were record high in sales. My own father wouldn't buy a downsized GM car, he switched to a Ford LTD, a nice car but he hated it but wanted a big car