Rebounding Premium Rides Can Only Do So Much to Budge a Flat Market

Steph Willems
by Steph Willems
rebounding premium rides can only do so much to budge a flat market

The new vehicle market has stopped marching. For three weeks in a row, sales in the U.S. plateaued, mirroring COVID-19 case levels in many locales. Try as they might, neither doctors nor dealers seem capable of eradicating all of the bad and returning the country to its coronavirus-free, spend-happy ways.

Things take time.

If you’re a purveyor of premium cars, however, things are looking up. If mainstream’s your bag, uncertainty reigns. And if you thought Memorial Day Weekend sales offers would stimulate the industry and kick-start a renewed sales climb, well, you were out of luck.

Of course, this week presents another opportunity for the tide to change. You know what they say about hope…

The data revealed late last week by J.D. Power shows that a U-shaped return to normal was never a likely scenario. Things will return in fits and starts, and indeed, the industry did start off strong. Different markets responded differently, however.

New York and Detroit, two major markets that all but ceased purchasing new vehicles during the depths of the pandemic lockdowns, continue bouncing back, rising to just 33 and 25 percent below pre-virus sales forecast for the week ending May 24th. Other markets, Tampa and San Francisco most notably, seem to have flattened out well below that weekly pre-virus forecast.

Mainstream automobiles didn’t budge that week, despite Memorial Day offers set up a week in advance of the holiday. Retail sales as a whole came out 25 percent below forecast during the week ending May 24th, the same as the week before, and slightly worse (in terms of percentage) than the week before that. Mainstream autos were flat, with compact cars still eating it (down 45 percent below forecast).

Premium auto sales, on the other hand, rose 8 percent, ending the week down 19.2 percent vs forecast. One segment, small SUVs, was down only 4 percent; another, midsize SUVs, came away just 14 percent below earlier expectations. Solid improvements, helped along by offers from automakers like Lexus, which decided in May that the time was right to slash interest rates on all of its models.

Thanks to this, the week of May 24th saw Detroit’s non-premium market share fall to the lowest level since mid-March (39 percent), with mainstream foreign makes accounting for 48 percent of the market.

While assembly of new vehicles is now underway in the U.S., with pickup production accelerating in some corners, just how much weight the declining inventory of full-size pickups lent to the results is difficult to say. Once plant capacity returns to normal and dealers have a chance to take delivery of fresh stock, we’ll have a better picture.

Perhaps last week, which contains the actual Memorial Day holiday, will break the slump and budge the needle. Stay tuned.

[Images: Toyota]

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 1 comment
  • Lorenzo Lorenzo on Jun 01, 2020

    The economy as a whole may experience a U shaped rebound, but individual finances will take a lot longer to recover. It's like having to repeat a grade in school, where they tell you, "Better luck next year."

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