Industry Surprised at Pace of Pandemic Recovery in Automotive

For eight weeks, production at North American auto factories was silent, except for personal protective equipment to aid in COVID-19 treatment and prevention. In that very short time, sales plummeted across the nation to roughly half of last year’s numbers over the same period. Although their accounts were flush, carmakers quickly turned to available credit lines to support their operations to the tune of $72 billion.

There’s plenty more credit to draw from if necessary, and almost all manufacturers have the funds on tap to weather the financial storm. But what’s happened in recent weeks has left industry experts scratching their heads in wonder as car sales have rebounded faster than expected.

Edmunds had reported a record low number of April 2020 sales that followed the weakest March sales in history. The horizon was looking bleak, and TrueCar subsidiary ALG predicted a long-term economic slowdown due to COVID-19 would impact year-over-year sales by 14.9 percent. They’re far from the only ones who expected long-term effects due to the coronavirus.

AlixPartners LLC projects sales even lower – around 21 percent lower than last year – and estimates it could take manufacturers up to five years to dig out from the billions in borrowing. Their forecasts also estimate it will be 2025 before sales volumes resume pre-COVID numbers.

What’s happened, though, is contrary to those analyses. 

May Sales are Climbing

The Big Three automakers are only reporting sales quarterly now. However, sales reports from the other manufacturers show significant improvements over forecasts for the month of May 2020. 

• Hyundai Motor America was forecasting a 33 percent decline in year-over-year sales but clawed their way back to just 13 percent below last May’s figures – a full 20 percent more sales than expected. 
• American Honda was down 16.9 percent compared to last May, recovering from an April that was down 54 percent compared to last year.
• Volvo Car USA sprung back to nearly normal, down just 2.5 percent compared with last May. 
• Mazda North American Operations reported May 2020 sales that were just a single percentage point down from May 2019. 

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

Related: Coalition of Caring Dealers Providing Support During Pandemic Recovery

Dealerships Doing Better than Expected

May’s sales have been surprisingly strong for many dealers. A few have even reported sales figures that exceed pre-COVID numbers, a clear sign that customer sentiment has recovered well in recent weeks.

All of these above-expected reports are despite the fact that the joblessness rate is still incredibly high in the United States. The unemployment rate remains higher than 13 percent, showing that many Americans still haven’t returned to work after being furloughed or laid off during the pandemic. When the bulk of the public has gone back to work, it makes sense that more car sales will follow due to people collecting regular paychecks once again.

With the auto industry nearing the normal numbers in May, that could mean parity – or close to it – for June’s sales figures compared with last year. Perhaps that even means that the adjusted SAAS of 14.9 million units this year is lower than it will actually be.

Did you enjoy this article from Jason Unrau? Read other articles from him here.

Car Biz Today, the official resource of the retail automotive industry.