U.S. Auto Sales Recovering But Still Devastated From Coronavirus Pandemic

First Up 05/29/20

U.S. Auto Sales Recovering But Still Devastated From Coronavirus Pandemic

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, reports CNBC. 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. Edmunds, Cox Automotive and ALG, a subsidiary of TrueCar, expect sales of between about 1.05 million and 1.08 million this 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. Read more here. 

Pandemic Forces Car Dealers to Do the Unthinkable: Sell Online

E-commerce has been embraced for all manner of goods and services, but auto sales have resisted the trend. With the coronavirus and stay-at-home orders, that is changing, reports The New York Times. In reporting its first-quarter earnings, General Motors said 750 of its dealers had signed up for its “Shop Click Drive” e-commerce system since the outbreak began. AutoNation, a chain of more than 325 dealerships, also reported a jump in online-only sales in March and April. The company’s chief executive, Mike Jackson, said he believed online sales would continue increasing even as stay-at-home restrictions were eased. “This is what the industry has needed to do for a long time,” he said. “This is an inflection point, a strategic shift, and it’s not going back.” Paragon Honda sold about 70 vehicles a month online before infections started to surge in March, a small fraction of its typical monthly total of about 1,300. In April, the dealership sold 378 cars online, and the total for May is expected to exceed 500, said Brian Benstock, Paragon’s general manager. Read more here. 

Dealers See Access to Auto Loans Tightening

As lenders tighten credit access to mitigate risk from the coronavirus pandemic, dealerships face more difficulty getting customers approved for auto loans, reports Automotive News. A survey by the Federal Reserve issued to "select large banks" signals that more stringent lending practices have been adopted for consumer loans, including auto loans. Sixteen percent of lenders who responded noted that lending standards for auto loans tightened somewhat over the past three months. Jonathan Smoke, chief economist at Cox Automotive, said there's early evidence of tighter credit standards at certain lending companies. Aside from aggressive incentive activity from automaker captives, which is beginning to wane, large non-captive lenders are starting to pull out of automotive originations. "There's more conservatism on the part of the lenders. That's why we haven't really seen subprime or used-car [finance] rates come down, even though the [Federal Reserve] cut rates to zero," Smoke said. Read more here.  

GM Plans to Ramp Up Plants with Dealers Running Low on Pickups

General Motors' North American assembly plants have overcome initial parts-supply challenges and will boost production next week, reports Automotive News. Three U.S. factories building mid- and full-size pickups will operate on three shifts starting June 1, the automaker said in a statement Thursday. GM has been running just one shift at the facilities and was unable to increase output this week because supply of parts from Mexico was constrained. GM said three other factories that build crossovers in the U.S. and Canada will move to two shifts, from one. Five of its assembly plants will still operate on one shift. Chevrolet and GMC dealers have been running low on inventory of GM’s redesigned Silverado and Sierra models, which are among the most lucrative in the company’s lineup. Mike Jackson, the CEO of AutoNation Inc., said in a Bloomberg Television interview this month that the largest U.S. new-car retailer was eager to rebuild its stock of Silverado. Read more here. 

Nissan Shares Fall as Turnaround Spending Leads to Massive Loss

Bloomberg reports that Nissan Motor Co. shares fell as much as 7.7% after the Japanese automaker posted a 671 billion yen ($6.2 billion) net loss for the latest fiscal year due to new restructuring measures and the coronavirus pandemic. The result, announced a day earlier, is the first loss in a decade and the biggest in 20 years. The carmaker’s new mid-term plan calls for the elimination of 300 billion yen in annual fixed costs, cutting capacity, and reducing the number of vehicle models. The reorganization is part of a broader push by Nissan and alliance partners Renault SA and Mitsubishi Motors Corp. to focus on costs and profitability to weather a collapse in car demand due to the coronavirus pandemic. Shares of Nissan fell 5.9% as of 9:34 a.m. in Tokyo. They were already down almost 30% this year before the announcement, out-pacing the declines by Toyota Motor Corp. and Honda Motor Co. Read more here. 

AutoTalk Webinar: An Update on COVID-19's Impact on U.S. Auto Sales

Cox Automotive Senior Economist Charlie Chesbrough will return to AutoTalk on Thursday, June 4 at 2:00 p.m. EDT for an update. Topics to be reviewed include:

  • Economic forecast and impact going into the second quarter

  • Consumer sentiment and buying behaviors

  • Stock market, interest rates, and employment

  • An outlook for vehicle sales

  • Current view of new and used retail sales and prices

Click here to register. 

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