The Coronavirus Outbreak Is Devastating New Car Sales and April Will Be Far Worse
Today on Speed Lines: At least for now, truck sales prop up the U.S. automakers.
Welcome back to Speed Lines, The Drive's morning roundup of what matters in the world of transportation. We are going to get through this.
New Car Sales Crater In March, Q1
I've said this before and I'll say it again: generally, if people aren't buying houses and they aren't buying cars, your economy is screwed. And with unemployment skyrocketing to record levels, much of the country ordered inside and nearly everyone nervous about their future to some degree, we won't be seeing much of either anytime soon. (Plus, even if you wanted to buy a car right now, many dealers across the country have been ordered to close or dial back their hours.)
We touched on the coronavirus outbreak's impact on new car sales a little bit in yesterday's Speed Lines, but today we have a more complete picture of its effect on sales in March and the first quarter of 2020. Some automakers post monthly numbers and some only do them quarterly.
But any way you want to look at it, it's bad. This is especially true in New York and Michigan, two of America's biggest current "hot spots" for the outbreak. Here's The Detroit News:
The sales pain spread across all sectors of the automotive market. Toyota and Hyundai saw first-quarter sales decelerate, with the Japanese giant dropping 35.3% in March alone. Including its abysmal 43% March decline, Hyundai reported an 11% drop in the first quarter. Luxury automakers were particularly hard it with Porsche first-quarter sales chopped 20.2% from a year ago (after a record 2019) and BMW off 15.3%.
The industry is bracing for difficult months ahead with March a passing rainstorm compared to the coming April hurricane. With states expected to be in lock-down until April 30, J.D. Power predicts an 80% decline in sales.
After a record five years of annual U.S. sales over 17 million units, sales were expected to slow in 2020, according to J.D. Power forecasts, to a still healthy 16.8 million units. But with automakers poised for the spring selling season beginning in March, COVID-19 has changed the landscape. Assuming sales pick up after July, annual sales should stabilize between 12.1-14.8 million units for the year — down 10% to 30% from their 2019 projections.
"It's going to get much worse in April as uncertainty rises and the potential that regulations will stay in place," said Thomas King, chief product officer for J.D. Power. "We expect 1.6 to 2.4 million unit sales lost from March though July."
The U.S. automakers all do their sales figures quarterly now. And Fiat Chrysler, General Motors and Ford have the advantage of offsetting some of these losses with record-high truck sales, boosted by incentives and deals. The incentives will continue into what's expected to be an abysmal April, but as CNBC notes, who knows how long that truck surge will last:
While the growth in market share is expected to be temporary, it’s a “good win” for the Detroit automakers in a very challenging market, according to Tyson Jominy, vice president of data and analytics at J.D. Power.
“It’s certainly helpful from a health perspective for the time being,” he told CNBC. “They’re certainly moving a lot of high-profit trucks even if the incentive load is fairly high.”
The trucks always save the day, somehow.
This Couldn't Come At A Worse Time For Cadillac
Cadillac is attempting its, I don't know, third or fourth "revival" just in the time I've been alive, but this latest one—more crossovers until it can pivot to electric cars—seems like it's about to get kneecapped by the pandemic. Here's The Detroit Free Press:
New-car sales across the industry have dipped amid the uncertainty the pandemic has brought to the market. Cadillac canceled plans for vehicle reveals and launches in April because of the rapidly spreading coronavirus.
Now its plan for a broader revival could be derailed.
"There is no question that the pandemic has put immense pressure on the industry and most future plans," said Jeff Schuster, president of Americas Operations and Global Vehicle Forecasts at LMC Automotive. "That certainly includes the revival of Cadillac through product."
[...] In Cadillac's case its quarterly sales plunged 15.8% to 30,325 cars sold. One estimate said the loss this year in new vehicle sales across the industry could be as much as 3 million vehicles.
Performance and luxury vehicles are about to suffer the most in this sales downturn, and Cadillac in recent years was struggling against competitors to begin with. Who knows if it can weather this latest storm.
The Shipping Industry Gets Hammered Too
There isn't a single sector of the economy that isn't affected by the pandemic. That includes shipping, too, including the shipping of new cars to and from overseas. Here's The Wall Street Journal on just how bad things are getting in the freight business:
Bulk carriers, the operators that move coal, iron ore, wheat and other commodities, are coping with low freight rates and slipping demand. China, the world’s biggest commodities importer, drastically cut down inbound cargoes of iron ore and coal in the first quarter.
A recovery in freight rates isn’t expected until late into the second half and that is if the virus doesn’t engulf big exporters like Brazil and Australia. The average daily freight rate for large bulkers stands at around $8,000 a day, less than half the break-even level.
The specialized car carriers that haul automobiles and other vehicles around the world are reeling as automotive factories shut down. Norway’s Wallenius Wilhelmsen, one of the world’s biggest car carriers, last week said it would furlough about 2,500 workers—half of its production staff in the Americas—and pulled 14 ships from its fleet.
Only tanker operators appear to be weathering the pandemic storm. Crude carriers are on a healthy run as oil importing countries and traders are buying big amounts of oil to replenish strategic reserves and for storage at record low prices.
Until oil demand plummets, of course. Which it's about to.
On Our Radar
US jobless claims skyrocket to 6.6 million (Business Insider)
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What does April look like to you? How about Q2 as a whole?