Automakers are headed for a less-drastic U.S. sales collapse than feared, according to market researchers.
Retail sales to consumers are down about 50%, a drop-off that wouldn’t be as steep as China or Western European countries saw in the first full month following their coronavirus outbreaks, according to Jeff Schuster, senior vice president of forecasting with LMC Automotive, a partner of J.D. Power.
“We’re now expecting a pattern that is more of a sustained level of a 40% to 50% decline over a longer period of time, instead of the really deep hit and then a relatively quick recovery,” Schuster said by phone.
The industry caught a break last week when Department of Homeland Security guidelines added vehicle sales to its list of essential services. All U.S. states now allow cars to be delivered through showrooms or online, according to J.D. Power, potentially providing some relief to an industry that has seen a dramatic drop in demand since many states ordered citizens to shelter in place.
“We are probably going to be down in April somewhere between 55% and 60% for the industry,” Tom Doll, the chief executive officer of Subaru Corp.’s U.S. sales unit, said on Bloomberg Television, adding that the Tokyo-based company will register a similar decline. “The coronavirus hit and everything just kind of fell apart.”
Retail sales were down about 48% last week from J.D. Power’s pre-crisis forecasts, after dropping 51% the week that ended April 12 and 55% the week prior. That marks three straight weeks of improvement from the 59% plunge registered in the last full week of March.
The best-performing major segment has been large pickups, while compact cars have been hardest-hit, J.D. Power said.
The used-car market remains a cause for concern, according to the researcher. Wholesale auction volumes last week were about 73% below J.D. Power’s pre-crisis forecast. With physical auctions closed, just 161,000 vehicles have been wholesaled since mid March, down about 419,000 units from the same period a year ago.
The price of vehicles sold at auctions has fallen about 16% from the beginning of March, according to J.D. Power. The researcher said the decline reflects dealers’ eagerness to sell down their inventory of used cars and their reluctance to restock in the midst of the pandemic. It expects prices to decline 8% to 16% through June, then stabilize by year-end as the country reopens.
Subaru’s Doll is reluctant to predict how new-vehicle sales will shake out for the year. He’s fearful that without another round of stimulus similar to the “cash for clunkers” program deployed during the last recession, it could take years for the industry to return to pre-crisis levels of demand.
This much is for sure about how many vehicles Doll expects Subaru to sell this year: “It’s going to be less than the 725,000 vehicles we were anticipating.”