Automakers are looking at 32% sales decline in May, exacerbated by the drop in fleet sales led by rental car companies not buying new vehicles.

New vehicle sales are expected to drop by almost a third in May, dragged down by the collapse of fleet sales highlighted by the recent bankruptcy by Hertz.

ALG Inc., a subsidiary of TrueCar Inc., expects new vehicle sales will reach 1.008 million units in May 2020, down 32% from a year ago. This month’s seasonally adjusted annualized rate for total light vehicle sales is an estimated 11.8 million units, a level last seen during the Great Recession.

Excluding fleet sales, ALG expects U.S. retail deliveries of new cars and light trucks to be 1,008,916 units, a decrease of 21% from a year ago.

(Hertz Chapter 11 filing poses challenge for automakers – and used car buyers.)

Buyers are finding a slew of new opportunities to buy new vehicles using the internet.

Fleet sales, one the other hand, are expected to drop 21%. Rental companies, led by Hertz, have stopped buying new vehicles in response to the collapse of the travel industry and state and local governments are being forced to rein in spending for police cars, vans and other vehicles as they cope with the fallout from the pandemic.

Eric Lyman, chief industry analyst for ALG, a subsidiary of TrueCar, said the stronger than expected retail signs have given the industry a lift. The Memorial Day holiday weekend is traditionally a strong selling period for automakers.

“The automotive industry is showing positive signs of a rebound and, while we are projecting a 21% decline in retail sales for May under this unprecedented environment, it’s quite encouraging,” he said.

(Rental car companies slash order, deliver another blow to auto industry.)

“Our own consumer research has shown that 72% of car shoppers state that their need for a vehicle has remained the same or increased due to the pandemic,” Lyman added.

Automakers have been struggling for years to increase internet sales and now the pandemic has driven buyers to the online option.

He noted that consumers are also discovering – and enjoying – the convenience of buying a vehicle on the internet. There are a variety of online options that dealers across the U.S. are offering. Additionally, after struggling for so many years to find ways to use the internet to bolster sales, they’ve found ways to overcome bottlenecks, such as vehicle delivery, remote paperwork and home test drives.

“Brands like Hyundai and Volkswagen are showing the lowest levels of declines in total retail unit sales due to their robust product lines with strong deferred payment options, low interest rates, and job loss programs. These types of offers are resonating with consumers and raising confidence in the marketplace,” Nick Woolard, director of OEM and Affinity Partner Analytics at TrueCar.

(U.S. new car sales continue rebounding — but industry isn’t out of the woods yet.)

When all the sales in May are counted, the SAAR is expected to decrease 32% from a year ago from 17.4 million units to 11.8 million units.

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