COVID-19 May Already Be Causing New Car Sales to Fall

COVID-19 may already be causing new car sales to fall

The global spread of COVID-19, commonly called coronavirus, already has car shoppers abandoning showrooms. While states and municipalities only implemented social distancing measures fairly recently and are continuing to do so unevenly, the effect is being felt in showrooms, according to Edmunds.

With six days left in March, Edmunds predicts that 1,044,805 cars and trucks will be sold in the United States. That represents a seasonally adjusted annual rate (SAAR) of 11.9 million, according to Edmunds. SAAR is a metric used in business that attempts to remove seasonal variables from data. The predicted SAAR for March 2020 represents a 35.5% decrease in sales from March 2019 and a 23.4% decrease from February 2020.

Decreased March sales will lead to a drop in quarterly sales, according to Edmunds. Analysts predict 3,546,415 new car and truck sales for the first quarter of 2020, representing an 11.8% decrease from the first quarter of 2019.

“The first two months of the year started off at a healthy sales pace, but the market took a dramatic turn in mid-March as more cities and states began to implement stay-at-home policies due to the coronavirus crisis, and consumer understandably shifted their focus to other things,” Jessica Caldwell, Edmunds’ executive director of insights, said in a statement.

That doesn’t mean automakers are slashing prices in desperation, though. Many of the largest automakers, including General Motors, Honda, and Toyota, have shut down factories, in part because they anticipated a drop in sales (some of those factories are retooling to make medical equipment). That has limited inventory, which puts less pressure on automakers to offer more incentives, according to Edmunds, which also noted that this could change as the coronavirus pandemic continues.

“Automakers can count on capturing some deferred demand once we get past the worst of this pandemic, but since they’ll be competing with so many other companies for consumer spending at that point, they’re really going to need to create incentives to spur sales,” Caldwell said. The auto industry is also expected to get a share of a government stimulus package, which could help stabilize it as sales rebound, she added, calling that an “encouraging update.”

Social distancing measures and fear of infection will likely slow down traffic in showrooms, which could force a shift to online sales. General Motors has been highlighting its little-known online sales tool “Shop Click Drive,” but most other automakers aren’t as well positioned to pivot away from dealerships. Tesla has sold cars online from the beginning, but the forced closure of its California factory means the automaker will likely have to rely on an existing inventory of lightly used cars.

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