Car sales appear to be losing momentum under the weight of continuing spread of COVID-19, which is sweeping through key automotive markets such as Texas and Florida.
For the week ending July 19, retail sales were 9% below the pre-virus forecast, 6 percentage points worse than the prior week, according to a new weekly report from J.D. Power & Associates.
J.D. Power reported that customer-facing transaction prices climbed $253 from last week to $35,396. “The week-over-week increase was primarily driven by higher premium nameplate share as well as prices edging higher in pickup segments. The result for the current week ending July 19 is 6.0% above the same week in 2019,” the firm noted.
For the week ending July 19, premium retail sales were 2% above the pre-virus forecast, an 8-percentage point step back from the prior week. In the face of the stalling sales. Power reported that manufacturers and dealers held off on increasing incentives. Incentives increased by only $29 per unit.
Incentive spending per unit for the week ending July 19 was $4,158, an increase of $29 from the prior week.
Sales of used vehicles at franchised dealers beat pre-virus forecast by 1% in the week ending July 19. While this represents a slowdown vs. the past six weeks, it is still indicative of strong demand for used vehicles, which is consistent with prior periods of challenging economic conditions.
Used retail prices rose once again, increasing 0.5 percentage points week-over-week for the week ending July 19. Prices are now 4% higher than pre-virus levels. While wholesale prices for used vehicles sold at auction remain strong, the rate of growth week-over-week is beginning to slow, according to the new report from J.D. Power.
Jonathan Smoke, Cox Automotive chief economist, said, in new report, “The growing number of cases of COVID-19, which are setting new daily records, threaten the recovery that created growth in retail sales and new construction in June.”
Strong demand in the auto market had reduced supply of new and used vehicles, leading to record prices last month. However, the rise in COVID-19 cases since then has led to reduction in sales activity hurting consumer sentiment. Further causing a slowdown is that jobs recovery seems to be slowing as well. This combination of factors could stall any sort of economic recovery, Smoke said.
The initial June reading on Consumer Sentiment from the University of Michigan declined to 73.2 from 78.1 in June. The decline in sentiment was driven by declining views of future expectations as well as current conditions.
Consumers also saw declining buying conditions for vehicles but modestly improving buying conditions for homes. The decline in buying conditions for vehicles was driven by more negative views of vehicle prices and interest rates on auto loans.
The decline in the Michigan survey was consistent with the decline in consumer sentiment we have been tracking in the daily measure of consumer sentiment from Morning Consult. That index shows that sentiment declined again during the past week and is down by 23.