After a difficult first half of 2020 courtesy of the coronavirus pandemic, automakers are expected to report some better sales news when it comes to the third quarter.
Edmunds.com analysts are expecting U.S. automakers to report sales of 3,850,707 new cars and trucks, which amounts to an 11% decrease compared with the third quarter of 2019. However, it represents a significant uptick in sales from the second quarter: a 30.6% increase.
“Third-quarter sales make at least two things apparent: Most of the doomsday scenarios forecasted at the beginning of the pandemic fortunately did not hold true, and the American consumer stepped up to become one of the many heroes in this chapter of resilience for the automotive industry, ” said Jessica Caldwell, Edmunds’ executive director of insights, in a statement.
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“Consistently lower interest rates encouraged new-car buyers — who were less likely to be financially hindered by the economic fallout of the pandemic — to pull the trigger on a purchase. Rising used vehicle prices also likely made the new car market more appealing for shoppers on the fence between the two. And car owners also got to leverage the extra value that trade-ins are commanding during COVID-19 to offset the cost of their next purchase.”
Much of that improvement is coming through buyers working with dealers, the company notes. Jonathan Smoke, Cox Automotive’s chief economist, noted that sales in September were picking up, in part due to the Labor Day holiday, but also he noted in his weekly webcast that sales remained strong during the weeks since the long weekend.
He noted that new vehicle inventory was less than 2.2 million vehicles, which indicates that production is still trying to catch up to sales. Smoke said retailers had about a 42-day supply of new vehicles, which below the target of 60 days.
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“New vehicle inventory remains significantly below pre-pandemic and last-year levels, and we see, very few 2021 models,” he said.
Fleet sales continue to struggle to return to form as the economy continues to limp along. Edmunds estimates that fleet transactions will account for 10.8% of total sales for the third quarter, compared to 17.2% in the third quarter of 2019 and 13.2% last quarter.
Caldwell noted that the industry won’t be considered back to normal until those fleet sales return. That could be some time as the drop in purchases from rental car companies alone are pulling more than 1 million sales annually out of the business, and with travel restrictions in place, that’s unlikely to pickup anytime soon.
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“The last piece of the puzzle for the industry’s recovery is fleet sales,” said Caldwell. “Daily rental companies have understandably reduced or delayed orders as Americans continue to stay at home rather than embark upon business or air travel. It will likely take a bit longer for this side of the business to make as dramatic a comeback as its retail counterparts.”