Major Pain Ahead For Auto Sales: Analysts Predict Steep Drop In COVID-19’s Wake

Social distancing measures including stay-at-home orders are wreaking havoc on new car and truck sales

[Photo: TFLcar]

Dealers are feeling the strain.

Automotive sales show significant drops in the wake of the ongoing global pandemic.  So far, we’ve seen a drop of 22 percent nationwide through the week of March 22nd as reported by J.D. Power. In addition, the report states that cities on the West Coast may have dropped as much as 40 percent this month alone. 

Tyson Jominy, J.D. Power’s vice president of data analytics, said of the situation, “We expect to see a much broader and wider impact from these restrictions next week with sales declining 80% or more.” Reuters notes the larger wave of shelter-in-place orders that are taking effect across the country, compelling people to stay home rather than go to dealerships or conduct any non-essential travel.

Several automotive companies are set to furlough their staff for 30 to 60 days as the virus continues to spread. This includes sales, marketing and research staff across the industry. As coronavirus wreaks havoc on the economy, smaller independent dealers are ultimately shutting their doors altogether. 

Production grinds to a halt

FCA just announced that they, like many automakers, will close facilities in the US and Canada through April 14th. Automotive suppliers from tire makers to high-tech components have seen significant drops in revenue as production shuts down across the globe. In many cases, workers have been sent home until cleared to return to work.

While the news isn’t good, there are many experts who see light a the end of the tunnel. Some companies are refusing to lay off workers. “Nobody will be laid off – if need be, I’ll waive my salary” Managing Director of oil producer Liqui Moly Ernst Prost. Once the worst passes, analysts are also confident sales will bounce back. Only time will tell.  

As we’re coming up on the end of March, automakers are poised to release their first round of quarterly sales results. From here, we’ll be able to see the effect as coronavirus restrictions came into play in March, but our eyes are also looking ahead to the second quarter sales in July. That will show more long-term effects on car sales, especially if the stay-at-home orders drag on any longer than mid-April.