The Virus Hits US Sales Hard
The novel Coronavirus known as COVID-19 dominates the news right now. Automotive news is no different. COVID-19 has impacted every industry from toilet paper to airlines, and the automotive industry is no different. It’s hard to buy cars if you’re told by the government to shelter-in-place.
Add to that the fact that most dealerships across the country aren’t operating and the ones that are, are scrambling to find a way to do business without coming into physical contact with buyers and you have a recipe for disaster when it comes to auto sales.
This news shouldn’t surprise anyone. The COVID-19 pandemic will impact every aspect of our everyday lives, and until the medical community can create a vaccine or determine a cure, auto sales—and for that matter the rest of the economy—will continue to suffer.
The automotive industry in the U.S. saw unprecedented drops in sales in Q1. Let’s take some time to take a closer look at the situation and the data we’ve compiled for the first quarter of 2020.
How We’re Reporting Sales Numbers
With most automakers reporting sales quarterly, it makes sense to do estimates for the monthly sales reporting of these automakers. In addition to that, some automakers still report sales monthly.
We estimate sales based on the quarterly analysis. We also still report the monthly sales of the automakers that provide that information.
COVID-19 makes the practice of estimating sales difficult. The steep decline in sales didn’t hit until March, which means that there’s part of the quarter with more or less regular sales, and part of it with COVID-19-impacted sales.
Fortunately, there are still some automotive brands that report sales monthly. Those companies showed roughly a 17% drop from February to March in overall sales. We decided to use that figure as our benchmark to estimate the monthly sales numbers for those reporting quarterly.
What the First Quarter of 2020 Looks Like
Looking over our brand sales analysis, it’s clear that no automaker had a good March. When you look at just the first quarter, though, there happen to be a few automakers the eeked out a small YTD positive change.
Kia was up by 0.99 percent. Lincoln managed to squeeze out a 2.77 percent increase in sales. Ram powered on to a 2.53 percent increase. Tesla electrified the market with a whopping 72.55 percent increase.
Tesla and Ram don’t surprise me too much Ram was killing it before the whole deadly virus thing went down and Tesla has unique products and tons of hype around it as well as an affluent customer base and new models coming out. I would expect any issues with Tesla’s business to come much later in the year. It’s also worth noting that Tesla’s numbers are an estimate as the company doesn’t report exact sales numbers to us.
Kia is a bit surprising but I don’t think the company will be able to keep things rolling in a positive direction in the coming months and the same can be said of Lincoln. They got things off to a good start, but unfortunately, Q2 will likely be as rough for these automakers as it is for the rest of the field.
The big loser of Q1 was Fiat at a drop in sales of 49.05 percent, with Mini, Buick, and Nissan following. They all saw sales drop in Q1 between 30 and 50 percent. I expect more automakers will be joining their ranks in the coming months and sales quarters.
What Did COVID-19 Do to Auto Sales?
Across the board, automakers reported issues due to the COVID-19 outbreak. Roadshow by CNET reported the sales decline numbers that each automaker recently said they sustained due to the crisis.
The Q1 sales drops ranged from single-digit percentages to over 30 percent. When you look at just the month of March and COVID-19’s impact on sales, companies report far worse numbers ranging from the high 40 percentages all the way to over the low 50 percentages. Can you imagine losing 50 percent of your sales? That could be the future for many automakers.
It’s important to note that the high drops in sales reported by Roadshow are just for one month of Q1. In Q2 of 2020, we could see numbers in the 40 and 50 percentages for every month in the quarter.
Are We Through the Worst of It?
Not by a long shot. The longer the COVID-19 pandemic continues, the more impact it will have on U.S. car sales. Already, the pandemic has crippled the U.S. economy, and we’re not likely to see the full effects of the virus on the economy for many more months.
We used a 17 percent drop in sales as our benchmark from February to March. That was likely an optimistic number, and now that we’re really getting into things in terms of the COVID-19 crisis, there’s no telling how low sales will dip in the second quarter of 2020.
While the first quarter of 2020 didn’t look good, you can expect that the second quarter will be even worse. At this time, it’s unclear what the third-quarter sales and fourth-quarter sales will look like. It is possible for some of the economic losses to come creeping back by that time, but it’s not a for a sure thing by any means.
According to Anthony Fauci in an interview with CBS News, director of the National Institute of Allergy and Infectious Diseases, a vaccine for the virus will likely take between 12 and 18 months to create. It could be longer. At some point, some of the restrictions on businesses will open up, but the level of economic activity is likely to stay low if COVID-19 is still prevalent. Automakers will be in for a long and tough few quarters of sales ahead.
