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        home > news > Automakers > U.S. Auto Sales Set to Crash in the Weeks to Come

        U.S. Auto Sales Set to Crash in the Weeks to Come

        As lockdowns spread, April demand expected to be down 80%, recovery could take until 2021.

        Paul A. Eisenstein
        Paul A. Eisenstein , Publisher & Editor-in-Chief
        April 01, 2020
        The relatively strong sales of pickups provided the only bright spot for a U.S. car market being strangled by the coronavirus pandemic.

        The U.S. new car market has had the bottom drop out, as was widely expected as the coronavirus pandemic spread across the U.S. in March, but the outlook going forward is far more bleak than was forecast as recently as a week ago.

        April sales are now expected to be off by 80%, according to J.D. Power, the research firm previously forecasting a still significant 50% drop in demand this month. With much of the country still in lockdown for April and, with no clear end in sight for the pandemic, the question is when things will begin turning around.

        At this point, even if the shelter-in-place orders start to be lifted in May, the impact on the automotive market is likely to stretch on, said Power’s chief data officer, Thomas King. During a Wednesday afternoon briefing, King said, “We anticipate demand for vehicles in the second half of the year will be depressed by 10 to 30% so demand will not be restored to pre-virus levels until at least next year.”

        (What started out as a strong 1st quarter saw sales collapse in March.)

        Power has been able to track the collapse of the U.S. market in real time using its PIN network which draws sales data directly from thousands of U.S. dealers. It has not been a pretty picture, demand plunging, one regional market after another, over the past four weeks. There will be 39 states with various lockdown levels as of April 2 when Florida becomes the latest to enact strict quarantine rules.

        April sales were expected to be off by half, but now seem likely to tumble by 80%, according to Power’s Tyson Jominy.

        Detroit, which had actually been running slightly ahead of sales forecasts early in the month saw demand drop by nearly 100% over the last week, noted Tyson Jominy, who oversees the PIN network. Other cities hard hit by COVID-19 , the disease caused by the coronavirus, have had similar sales slumps, notably places like New York and San Francisco.

        There were a few cities still in positive territory as March drew to a close, according to Power data, but Tampa is now expected to see a sharp dip as Florida residents are ordered to shelter in place.

        Compounding matters, dealers in five states have been told to halt all sales while there are at least some sales restrictions in 25 states.

        “There is some light” in a few markets, said Jominy, in part reflecting creativity by dealers who are turning to online sales and contactless deliveries.

        (Car dealers struggling to cope with coronavirus turn to online, “touches” car sales.)

        If there is any real bright spot, that can be found in the pickup truck segment where demand has remained strong. A traditional truck market, Dallas is “showing the greatest resilience,” added Jominy, primarily due to strong pickup sales. Automakers, he noted, have helped prop up demand for products like the Ford F-150 and Chevrolet Silverado by amping up incentives.

        Givebacks on pickups have surged to a record $7,200 average, but givebacks, on the whole, ended the month at an average $4,800, “the highest we’ve ever seen, Jominy pointed out.

        The comparatively strong pickup market has helped Detroit’s Big Three automakers, Power data revealing they collectively captured 51% of what’s left of the U.S. market last week, up from 40% at the end of February.

        Luxury vehicles, meanwhile, suffered the sharpest decline, in part because many customers lease, rather than buy high-line products. They’re extending leases for now, but they could rush back to market in large numbers later this year.

        Power expects to see sales totally collapse in April and, at best, slowly begin t rebound in May and June. But that depends on how long it takes for pandemic to clear, (Click to Enlarge.)

        If any product segment is likely to be hit especially hard it will be pure battery-electric vehicles, warned King. As the industry recovers, he said, he expects manufacturers will focus on their highest-profit models, rather than traditional money-losers like EVs. That could prove especially problematic as 2020 was expected to bring the debut of a wave of new, long-range models, such as the Ford Mustang Mach-E and Volkswagen ID.4.

        The path of the coronavirus has proven especially hard to predict. At the moment, federal officials are hoping that the pandemic will peak by mid-April, but there are some concerns a second wave could strike next autumn, as has happened with past disease outbreaks. The number of Americans expected to come down with COVID-19 could run over 200 million, with anywhere from 100,000 to 240,000 or more deaths.

        (Coronavirus pandemic is crushing the auto industry.)

        Predicting what the pandemic will mean for the economy and, in particular, the auto industry, is proving equally difficult, Jominy and King agreed. As a result, Power is offering a range of forecasts for the year ahead. Where most analysts had expected 2020 to bring a modest decline, to somewhere around 16.8 million vehicles, Power now believes that the final figure will fall anywhere between 12.1 million to 14.8 million. That’s better than what was seen during the depths of the Great Recession but still a massive downturn likely to strain the financial resources of even the strongest manufacturers.

        “That will be extremely damaging to all industry constituents,” including automakers and auto parts suppliers, dealers and investors, and pretty much anyone else linked to the car business, warned King.

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