By on June 15, 2020

U.S. auto sales were already heading into a long-predicted cooling-off period when that spiky little virus arrived, throwing economies into disarray. As a result of the coronavirus’ impact on world markets, including that of the U.S., a return to the kinds of volume the industry enjoyed over the past few years won’t take place overnight.

According to a new Bank of America study, good times won’t really return until the middle of the decade — and even then, not to levels seen last year.

In 2019, the U.S. auto industry surprised itself by unloading 17.1 million new vehicles; a slight decline from the year before, but not the significant drop many predicted. Oh, if only those forecasters could have seen 2020 in their crystal ball…

As reported by The Detroit News, Bank of America’s annual “Car Wars” forecast sees U.S. sales falling 25 percent in 2020 — to 12.8 million vehicles — and not climbing back to a mere 16 million annual sales until the middle of the decade.

On a global scale, the study envisions a 20-percent decline for 2020, and no return to normal until 2023.

Earlier this month, a dire forecast from consulting firm AlixPartners projected 13.6 million U.S. sales this year, with a return to the recent normal not happening until 2025. Globally, the firm sees the industry shedding 36 million vehicles over a three-year period starting this year, with consumers foregoing car buying in order to pay down debt and stabilize their financial standing.

Lower levels of predicted consumer spending are hardly the thing to instill confidence in investors, and indexes did incur damage from Bank of America’s report. The Dow Jones plummeted in early Monday trading, though it’s since recovered most of the losses.

[Image: Fiat Chrysler Automobiles]

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8 Comments on “Quick Sales Rebound? Forget It, Says Bank of America...”

  • avatar

    Welcome to one of the weirdest economies known to mankind. Right now not only are new car inventories low due to shut downs but used wholesale car prices after tanking for two months are now jumping up 10-15% or more. Local wholesale auction was seeing sales at 2k higher on 20k cars then just a week before. Apparently used dealers are low on inventory too.

    I have a relative trained in economics who spent decades in banking even he has no idea what’s happening says there seems to be no “historic parallel”. Some parts are similar but not enough to draw conclusions.

    • 0 avatar

      It’s hard to get a yes/no or up/down answer out of economists – they have three hands! But seriously, one look at the average age of cars on the road will tell you car sales might be depressed in the short term, but there’s a steady market for replacements for those older vehicles as they become too expensive to fix.

  • avatar

    Yeah, no kidding Sherlock. New auto sales were already deciding since ’16.

    A lot of it is buyers aren’t impressed with what’s offered. Lots of lateral moves and not much in the way of innovation or improvement. Most things get uglier too.

    But then the blatant cost cutting, China connection, greed, bundling of options, jacking prices and reduced choices isn’t cute.

    Why doesn’t anyone report on the auto aftermarket and parts replacements industries growing exponentially?

    • 0 avatar

      I worked for a company making components for boats during the last recession. There was a huge trend for aftermarket sales from OEM. A lot had to do with pricing on new boats making older boats that much more tempting to refit.

  • avatar
    Jeff S

    Agree and on top of that vehicle prices keep on rising. 25k and above starting price of a midsize pickup along with more cost cutting and less quality. The aftermarket parts industry thrives during the worst of times–the longer people hold onto their vehicles the more demand for replacement parts.

  • avatar

    “U.S. auto sales were already heading into a long-predicted cooling-off period when that spiky little virus arrived, throwing economies into disarray.”

    I take issue with the opening statement. COVID 19 didn’t throw things into disarray, human decisions in response to it did so. Fine point? Possibly, but accurate nonetheless.

    Agree with DenverMike. How is the auto aftermarket and parts industry doing. With folks not buying, generally speaking, that would suggest folks keeping vehicles longer.

    • 0 avatar

      It’s taboo to write about or industry analysts to explore. But it’s the pink elephant in the room. Yes absolutely, the aftermarket industry has been growing by leaps and bounds for years while the new car sales stagnate or drop.

      Maybe you’ve heard of a little thing called SEMA. You can throw $8K at a ’90s Cherokee and maybe it’s just worth 7K when you’re done, but next year it’s worth the same or a little bit more. Except it was done to your specs, and you decide the China content (if at all) and where it’s placed.

      With the median new vehicle exceeding $37K, that could go a long way on a Fox Mustang build, or Miata, etc, built in stages or whatever. It could be we’re just getting smarter, and that 37K car is worth what in 3 years?

      Combined with not having a payment (or quickly depreciating asset), a few years old Rav4 or F-150 can be made a lot more enjoyable to own and drive with a little help from the aftermarket.

      It could be backlash against new vehicles, but every year there’s rapidly increasing and tasty alternatives, where as the analysts insist if new vehicle sales are down, we just can’t afford them.

  • avatar

    Not sure what Bank of America gurus are providing here but the obvious that a trained chimp could forecast. Throw thirty or forty million out of work with evictions bound to follow in huge quantity very soon, where even rentiers are going to suffer and not be able pay their”mortgages”, and only the really big boys will be able afford to buy up the scraps on the super-cheap. The 0.1% become the 0.01 percent and who in hell is going to be buying new vehicles in mass quantity? What about food? The weather last year kind of bombed a lot of the mid-West. Fun times for all coming soon.

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