The final impact of COVID-19 on the country’s auto industry is becoming increasingly less blurry. In the U.S., the Magic 8-ball foresees a significant hit to dealers and automakers in 2020, with J.D. Power now saying the already cooling market will see 3 million purchases vanish from sales ledgers.
The viral sales cull would bring the industry back to 2012-2013 levels, though at this point there’s too much uncertainty to predict when things return to normal.
As reported by the Detroit Free Press, J.D. Power’s study sees the country’s 2020 vehicle sales tally coming in somewhere between 14 to 16 million vehicles — down sharply from last year’s 17.1 million, though the regional impact will vary. Prior to the pandemic’s arrival, J.D. Power forecasted sales of 16.8 million.
The market has already shed some 38,000 sales in March, the report claims, with the decline accelerating as more states enact extreme social distancing measures. The impact on businesses, including dealerships, is compounded by an increase in (at least temporary) joblessness and virus-borne uncertainty.
As of this past weekend, new vehicle sales in Seattle had dropped 18 percent for the month, with San Francisco falling 17 percent. Those results, both coming from viral hotspots, are outliers compared to stable car-buying locales like Detroit and Minneapolis, the report said, but that will change.
A bright spot in the doom and gloom, J.D. Power said, is a glut of leases coming to an end. In the second quarter of 2020, some 1.8 million lessees will find themselves in need of new wheels.
Last week, Morgan Stanley analyst Adam Jonas forecasted a U.S. sales drop of 9 percent for the year — a steep fall-off from the previously forecast 1-2 percent drop. That puts the annual tally at about 15.5 million vehicles. LMC Automotive sees global sales falling 4 percent in 2020, adding that the virus’ impact could spill over into 2021.
[Image: Audi]
Sounds like this might be an opportunistic time for someone to get a good deal on a new car.
Probably a good time to pick up some bargains in the stock market as well…
Oh, you don’t have a job? Never mind
I wonder how much of this is self-fulfilling prophecy. It’s a piece made to support the bankers and the stock traders rout of the market.
We are experiencing this social distancing during one of the biggest car buying times of the year, tax refund season. If this only lasts a few weeks, paired with the direct cash payments talked about in the news, I honestly see the car purchases coming back as soon as people aren’t afraid to get out there and shop. If you need a new car, these measures only delay not stop you, you are going to go get one as soon as it is practical to do so.
I think you are actually going to see car inventories go through a rubber band effect. Right now dealer inventories are probably increasing as previously built cars are being shipped to dealers with no foot traffic. As soon as restrictions are lifted, the dealer traffic will resume. Now that the majority of the factories are closed down due to virus related issues, resupply will lag weeks behind as factories come back online. It could lead to a supply crunch on popular models, and a glut of other product.
I honestly see the economy and business sector roaring back to life as soon as the social restrictions are lifted. The only sector I am worried about is the oil industry here in the US as the foreign producers drive the markets down. If prices stay down, all of the small service providers we have across the country will go bust, and it will take a chunk of good paying jobs with it.
Exactly. All of the shutdowns are being touted as COVID prevention. But the shutdowns have more to do with a complete lack of demand than COVID infiltrating all of the automakers plants. But investors like the COVID story better, so thats what the automakers are sticking with.
There are a bunch of Ford dealers around here that have a LOT of 2019 inventory left. I wonder if they will have a “COVID Clearance Blowout!!!”
“…roaring back to life as soon as the social restrictions are lifted”
Sure, in May… or September. And it won’t just be a matter of civil restrictions, it will be a matter of trust.
Prediction: Shortly after the restrictions are lifted, new reports will surface that someone got infected. Then we’ll begin all over again.
New car sales won’t be 14 million; they’ll probably be more like 10 million.
It is true. There is a Russian saying: Temporary measures are the new normal.
This is all so unnecessary. We should never have destroyed our economy. We need to stop now.
John P.A. Ioannidis is professor of medicine, of epidemiology and population health, of biomedical data science, and of statistics at Stanford University and co-director of Stanford’s Meta-Research Innovation Center. Here is what he has to say:
https://www.statnews.com/2020/03/17/a-fiasco-in-the-making-as-the-coronavirus-pandemic-takes-hold-we-are-making-decisions-without-reliable-data/
We are cutting open our veins because we want to avoid getting sick. It is simply panic and hysteria.
I’ll tell you what, why don’t you find the tightest crowd you can and throw yourself into the middle of it and don’t skimp on the hugs
“…because we want to avoid getting sick”
Yep, with a highly contageous disease that kills 2 – 15% of its victims, depending on your situation. Those are worse odds than most wartime battles.
You need to read the article. It addresses this specific item of misinformation.
https://www.classaction.com/news/stat-news-credibility-problem/
Yea-“Stat News” is a great place for reliable medical news…..
I don’t know about the website itself, but it seems like the author, his credentials, and his current employment are all legitimate.
profiles.stanford.edu/john-ioannidis
Bloomberg reports that GM is preparing itself for a downturn. Even if sales dropped 25% over a 2-year period the company would still be profitable, although profits could drop as much as 70%. That means that annual sales could drop to 12.7 million and GM would still be profitable.
I don’t think an assumption should be made that all of the leases that are coming due in the coming months will result in new car sales/leases/deliveries. If things don’t correct quickly, it is not hard to foresee a reasonable portion of these people will be working less hours or will be unemployed.
+1. When my lease ends, I still have 2 other cars to use.
Can I just say… it’s so nice not having a car payment while staying home.
And having a beefy emergency fund in place.
Hopefully this situation teaches something about financial prudence to many folks. Then maybe we would lose 3 million sales next year and the years after, because those 3 million folks decided it wasn’t wise to go in debt for a stupid car.
Some of the dealerships in Cincinnati and NKY particularly GM are advertising online sales and 0% interest for 84 months. Steve Castrucci Ford has been advertising new 2019 Fusions starting at $14,999.
This estimate sounds more realistic than some earlier ones (smashed door, not a minor dent in the front fascia).
Possible effects going forward:
– Anyone no longer commuting to work (working from home, etc.) might choose no vehicle, or a *different* vehicle (might even be a nicer vehicle)
– If fuel prices are low at the time of the purchase decision, this could affect vehicle choices
– Wealth effect from stock market losses (or gains later on) will have a significant effect for some buyers, no effect for other buyers [not everyone owns stocks]
– At some point some buyers may have the means and desire to buy, but might not find the inventory they are looking for (supply chain restart issues)
– Herd mentality may also have implications
Here’s something, at least in Nevada…
I bought a secondhand vehicle a couple weeks ago. Got it home on the PO’s plate. (Thanks!) It needed some love, so I’ve been working on it.
Now it’s road-ready, but I can’t go to the DMV to get it road-legal. They’re open for appointment only, and no appointments are available.
And even if YOUR DMV is open, who wants to go sit there for 3 hours of non-distancing?
I’d insure it and roll the dice on registration. It would be a real SOB of a Cop that would ticket that (so long as it is in fact insured). I’d make the earliest appointment and carry proof of that around. If they did ticket me, I’d take my chances with the judge.
Cancel that appointment business. They’re just plain closed.
I’d imagine that this year’s car sales are going to tank through the end of the year. This virus is nasty and it will keep after us, but the level of panic we’re seeing doesn’t seem to be commensurate with the damage it’s doing.
Those repeating bad data or bad news need to cut it out. For example, this is not killing 2-15% of the people who get it.
Please stop spreading ignorance. These overreactions are making people act stupidly.
If you’re over 80 years of age, it’s 15%. This is why nursing homes are on lockdown.
How many people do you think the health care system can handle? That’s the real cause for concern, just to keep this manageable (and to hope not too many health care providers contract this as well).
Probably a very good time to buy a car. However, if auto production shuts down for long periods then supply issues will keep prices from falling down.