Commentary

Auto Sales Plummeted In Q2 But Rebounded In Recent Weeks

With auto production lines shut down for a couple of months due to COVID-19, white-collar workers who still had a job Zooming it in and potential buyers venturing out of their garages only for essential goods, the U.S. auto market had its biggest decline since the recession of ’09 in the second quarter.

“Fiat Chrysler Automobiles NV on Wednesday reported a 39% year-over-year drop in U.S. new-vehicle sales in the second quarter. General Motors Co. reported a 34% drop. Ford Motor Co. is set to deliver its sales on Thursday,” Jordyn Grzelewski and Kalea Hall write  for The Detroit News.

“‘[No one] thought this was going to be a really great quarter. We expected double-digit declines,’ Jessica Caldwell, executive director of insights for auto-information website Edmunds.com, Inc., told The Detroit News. But, ‘thinking back to where we were in mid-March, this result wasn't as bad as we thought it would be, fearing the worst,’” they add.

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BMW and Mini sales were down 39.3 and 41.5%, respectively, and car sales slipped 26% at Honda/Acura (although truck sales only fell 6.9%), Sebastian Blanco reports for Car & Driver. Hyundai was down 18%, Mazda 9.6%, Mitsubishi 58%, Subaru 25%, Nissan/Infiniti almost 50%, and so on. 

Volvo “had its best June sales numbers since 2006, but when taken as a whole, Volvo’s second-quarter sales were down 15.3,” Blanco adds. “Toyota and Lexus were down 34.6% overall, with Toyota selling 35.6% fewer vehicles in the second quarter of 2020 compared to 2019, and Lexus seeing a 26.8% drop.”

“Auto makers earlier in the spring rushed to offer recession-era discounts and financing deals, which bolstered sales of profit-rich pickup trucks and sped a rebound in retail sales as dealers got better at selling cars online. In recent weeks, retail sales, or sales to individual buyers, have tracked just 4% to 6% below pre-COVID-19 forecasts, according to research firm J.D. Power,” Nora Naughton writes  for The Wall Street Journal.

“But now many dealerships are running low on inventory as auto makers ramp up output after several weeks of factory downtime. Deals are drying up as car companies spend less on cash-back offers and pull back on attractive seven-year financing deals that brought customers to dealer lots during the pandemic,” Naughton adds.

“Despite the signs of improvement later in the quarter, it’s unlikely there will be a rapid increase in sales throughout the summer, said Jonathan Smoke, chief economist for Cox Automotive. Cox is forecasting a 35% drop in total U.S. sales for the second quarter once all the automakers report and the data are in,” Chris Isidore reports  for CNN Business.

“A Cox survey showed one-third of those who intend to buy a car said they will delay their purchases, driven by factors such as general uncertainty in the market and continued unemployment concerns. ‘The industry is facing the potential for a cruel summer for automotive sales,’ Smoke said in a recent presentation,” Isidore adds.

In addition, “weak fleet orders are expected to hurt June sales, which automakers will report on Wednesday. Cox Automotive forecasts fleet sales will fall nearly 56% to 1.3 million vehicles after plunging 83% in May and 77% in April,” Reuters’ Nick Carey writes  for Yahoo Finance.

With sagging sales battering the stock prices of most automakers, Tesla became the world’s most valuable car company.

“Shares in the electric carmaker touched $1,134 on Wednesday morning before falling back, leaving it with a market value of $209.47 billion. That is roughly $4 billion more than Toyota's current stock market value. However, Toyota sold around 30 times more cars last year and its revenues were more than 10 times higher,” the BBC reports.

“Led by Elon Musk, Tesla has seen ups and downs but its shares have risen steadily since late 2019 as it met key production targets for its Model 3 car, with the automaker topping Japan's Toyota in market valuation,” writes John Biers for Tech Xplore.

“The company still sells only a fraction of the autos of the Big Three, yet it has captivated investors' imaginations as a bet on the future under charismatic leader Musk, who has challenged conventional wisdom on CEO comportment while also trying to shift the industry towards electric cars,” Biers continues.

And so, Sebastian Blanco ends on a sober note over at Car & Driver: “It's our least favorite year in quite a while, but the bad news is likely to continue for the rest of the year, given that the U.S. has yet to get the coronavirus under control and many states are slowing down their reopening plans. We'll check back in three months from now to take stock, but we're not holding our breath for good news if for no other reason than because the last time we had quarterly reports to look at, ‘only’ 3900 people had died of coronavirus in the U.S. That number currently stands at around 120,000.”

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