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Coronavirus expected to cripple US auto sales; automakers push 0{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} financing

An employee passes in front of vehicles on display for sale at a Nissan Motor Co. car dealership in Patchogue, New York, U.S., on Friday, April 27, 2018.

Johnny Milano | Bloomberg | Getty Images

Automakers are offering 0{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} financing, deferred payments and online tools in an attempt to salvage sales as the coronavirus pandemic cripples the auto industry.

As a result of skyrocketing jobless claims, weakening consumer confidence and state orders for residents to stay at home and nonessential businesses such as dealer showrooms to close, automakers this week are expected to report their worst sales declines in years.

“Markets with significant virus activity and stay-at-home legislations should be expected to experience declines of 80{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} or more after those restrictions go into effect,” said Tyson Jominy, vice president of data and analytics at J.D. Power.

As of Monday, 35 states had enacted “stay at home” or “essential business” mandates that affect 231 million people, or 70{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of the U.S. population, according to J.D. Power. Many states are allowing dealer service departments to operate but not sales and showrooms.

J.D. Power expects auto sales to decline at least 32{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in March compared with a year ago. Edmunds forecasts sales to fall 35.5{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} this month, capping an 11.8{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} decline in the first quarter. Cox Automotive, citing the “volatility of the U.S. economy,” decided not to provide a sales forecast.

March sales are expected to be the lowest in the U.S. since January 2014 and the lowest first quarter since 2012, according to Edmunds.

“It’s obviously a disappointment,” said Jessica Caldwell, executive director of industry analysis at Edmunds. “Auto sales will be soft in March,” a month that typically is “the big volume month” in the first quarter.

Automakers are scheduled to report first-quarter vehicle sales on Wednesday. They are expected to decline across the board for every major automaker, according to Edmunds.

Online sales

Some automakers and dealers are attempting to push online sales to supplement lower showroom traffic. 

General Motors has been one of the leaders in offering online vehicle sales tools through its “Shop, Click, Drive” purchasing process. The online program allows much, if not all, of the sales process to be done online. Customers still may need to physically sign some paperwork depending on the state laws, but the vehicle can be delivered to a customer’s home.

Shop, Click, Drive launched in 2013; however, the program has never accounted for substantial sales as it was viewed by some dealers as a threat to their business. That sentiment is changing amid the COVID-19 pandemic, according to Mike Bowsher, owner of Georgia-based Carl Black Automotive Group and four GM franchised new car dealerships.

“It has taken on great importance recently,” he said. “There’s a lot of good going to come out of this, forcing the network to get into the 21st century overnight and learn how to do more online sales. … Everybody’s being forced into this.”

Chevrolet U.S. Vice President of Marketing Steve Majoros


While the online sales aren’t fully supplementing the decline in showroom traffic, Bowsher said sales leads and sales through the online program have significantly increased from a couple a day to 10 to 12 a day for his dealerships.

Steve Majoros, Chevrolet U.S. vice president of marketing for GM, said the traffic and usage of the platform is up “anywhere from two to almost four times” what the company typically experiences.

“Times like now, catalyst moments like this, are exactly why we’ve been focused on this for seven years or more with Shop, Click, Drive,” he told CNBC during a phone interview Monday. “The intention and the spirit all along was to allow customers to self-direct on their online discovery, purchase and delivery experience.”

Majoros declined to release specific details on the sales of Shop, Click, Drive. However, he said the base for many of the metrics was in the thousands. “We’re seeing a lot of traffic on new vehicles,” he said.

Porsche earlier this month announced additional incentives for dealers to join a digital sales pilot that the company launched last fall. The program, Porsche says, allows customers to complete the majority of the car-buying experience online with one, short visit to the dealership for final signatures.

The all-electric Porsche Taycan Turbo.

Source: Porsche AG

Individual dealers and dealer groups also are offering online sales and services. For example, North Carolina-based Sonic Automotive is now offering a “no contact sales and service pickup and drop-off option.”

“Knowing that your vehicle is essential to your daily life, we’re open for business! We’re keeping our service lanes and virtual sales showroom open,” Sonic CEO David Smith wrote in a message to customers.

Financing deals

In another attempt to spur sales, many automakers are offering special financing options and deferred payments. 

Both GM and Fiat Chrysler are offering well-qualified new car buyers 0{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} financing for 84 months and deferred payments of 90 days. Ford Motor is offering up to three months of deferred payment, and the company will pay for three additional months – allowing six months of payment assistance.

Honda, Nissan and others also are offering deferred payment options to well-qualified customers who purchase select new vehicles.

Such deals, according to Caldwell, should help generate some sales, but they won’t be enough to keep sales in the black.

“They’re doing what they can,” she said. “There are some people that do need to buy cars … I think after this is all said and done, we’ll probably see a lot of deals as well as automakers try to get back to normal sales and production levels.”

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