U.S. Car Sales Could Slump 34% this Year

On March 16, ALG, a subsidiary of TrueCar, and the industry benchmark for determining the future resale value of a vehicle, projected that in a quick recovery scenario where the economy and auto industry recover by the end of April 2020 back to levels prior to COVID-19 disruption, US new vehicle sales will reach 16.4 million, down 500,000 vehicles or -2.9% from ALG’s initial 2020 forecast of 16,9 million cars, and down 3.8% from 2019 sales. Well what a difference a week can make as they say.

In a March 23 update, ALG painted what could be a devasting scenario for the North American auto industry this year.

15.3 million vehicles (optimistic):

  • Movement restrictions lifted May 1
  • Stimulus packages deployed and having a positive impact

13.2 million vehicles (mixed):

  • Multiple social distancing periods limit out of home activity
  • Stimulus packages deployed and having a positive impact
  • Supply disruption due to production stoppages

11.2 million vehicles (cautious):

  • Ongoing social distancing and limited out of home activity through summer
  • Prolonged downturn, limited success of stimulus packages
  • Increased unemployment throughout 2020
Big Three automakers have already moved to suspend certain U.S. operations amid coronavirus restrictions, concerns for employee health, and slumping demand. Image courtesy of General Motors.

In the worst case scenario, ALG is forecasting a 34%-plus slump in vehicle sales this year in the U.S. but says the probable outcome is sales of 13.2 million vehicles, still an almost 23% decline year-on-year from the 17,047,725 units shipped in 2019.

“With the temporary closure of dealerships across the nation, continued declines in the stock market and ongoing uncertainty around the short/mid-term strategy to battle COVID-19, ALG expects further declines in our annual automotive sales forecast. While events continue to unfold daily, it seems the most likely outcome is vehicle sales landing in the mid-13 million range for 2020,” said Eric Lyman, Chief Industry Analyst for ALG.

“A dependable personal automobile will continue to play a critical role in daily life. Even during ‘stay at home’ orders vehicles will be used to get essential employees to work, deliver food, run critical errands and provide a safe transport in a time when public transportation is limited or unavailable,” continued Lyman.

“We cannot stress this enough, automotive sales will return,” said Morgan Hansen, Vice President, Data Science at ALG. “The aging U.S. vehicle fleet and growth of the millennial market are underlying pillars of strength in mid to long-term auto sales. Natural replacement demand remains steady at roughly 15.5 million vehicles per year. Sales below this figure are not ‘lost,’ but merely deferred until we see a return to our daily routine.”

Added Lyman, “Online shopping and digital retailing will play a critical role in mitigating the drop in vehicle sales. Automakers are already rolling out innovative incentive products to stimulate consumer demand but the industry must iterate on existing sales practices and become more accommodating to shoppers in a ‘stay at home’ environment.”

Note: All scenarios are absent severe impacts and “speculative pessimism” from:

  • Widespread supply chain or vehicle production disruption
  • Prolonged social distancing beyond 6 months
  • Prolonged closure of auto dealerships beyond 45–60 days
  • Stimulus packages delayed or ineffective
  • Significant and sustained declines in macro-economic fundamentals (demand)

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