U.S. auto sales recovering but still devastated from coronavirus

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Angus Mordant | Bloomberg | Getty Images

New vehicle sales in the U.S. are slowly recovering this month from their historic collapse in April due to the coronavirus pandemic. But they are still expected to be significantly down from a year ago.

Auto research firms forecast new vehicle sales to be slightly less than 1.1 million vehicles in May, down about 32% to 33% compared with May 2019. That would be a roughly 50% increase compared with last month.

“We can safely say that April was the bottom for auto sales during the coronavirus pandemic,” said Jessica Caldwell, Edmunds’ executive director of insights. “There’s still a long road to recovery ahead, but May auto sales are a really encouraging sign for the industry.”

Edmunds, Cox Automotive and ALG, a subsidiary of TrueCar, expect sales of between about 1.05 million and 1.08 million this month.

Critical month

May is historically a critical month for the industry as it kicks off the summer sales season — a time when automakers push to clear out current model-year vehicles to make way for newer cars and trucks. It the past five years, it has on average raked the third best month of the year for sales, according to Edmunds.

Many consumers remain under stay-at-home or shelter-in-place orders, but big discounts — including Memorial Day specials and 0% financing offers for up to 84 months — are driving some to purchase new vehicles.

Analysts note that automakers have already begun to dial back some of the more generous financing incentives made available at the start of the coronavirus crisis.

Such deals have specifically assisted in sales of large SUVs and pickups, which automakers are attempting to ramp-up supply of to dealers as production restarted for many U.S. automakers this month after being down since March.

Headwinds ahead

Production plants being shuttered and a slow restart for many facilities, including some parts shortages and pauses in production due to employees testing positive for Covid-19, are creating a shortages on some high-demand models such as pickups.

“The good news is that in general manufacturing is restarting,” Thomas King, president of the data and analytics division and chief product officer at J.D. Power, said Thursday during a webinar on sales. “Even with our diminished sales pace, we are still in an environment where the industry is selling more vehicles than it produces.”

J.D. Power doesn’t expect vehicle inventory levels to begin normalizing until July at the earliest, potentially leading to a sales plateau or decline in the coming months.

The industry is expected to lose between 1.2 million and 1.6 million retail sales due to the coronavirus pandemic through July, according to J.D. Power.

“Many of those will be recovered in the future, but some of them will be lost,” King said. He noted many consumers have “lost the accountability” to purchase a new vehicle or no longer need one because they no longer commuting to work. 

Retail sales do not include sales to fleet customers such as the government or businesses. They are typically more profitable than sales to fleet customers

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