First-quarter auto sales stall
Stay-at-home orders in pandemic create tough times at dealerships
Automakers reported a plunge in new vehicle sales as fear of the coronavirus and stay-at-home orders kept consumers from dealerships, adding to the troubles of the country’s largest manufacturing sector.
Ford Motor Co. reported Thursday that sales fell 12.5%. The sales drop was the largest of the Detroit Three automakers with Fiat Chrysler Automobiles down 10% for the quarter and General Motors Co. off 7%. The companies said a significant drop in March offset strong sales in January and February.
Toyota, Honda, Hyundai and MercedesBenz reported declines in March ranging from 37% to 50%.
Tesla does not break out its U.S. sales but is expected to report a first-quarter global total, and analysts expect a substantial decline, in part because Tesla had been growing in China, which was affected by the virus for much of the first quarter. Tesla began producing cars at a new factory in Shanghai late last year. It temporarily suspended production March 23 at its plant in Fremont, California.
Toni Sacconaghi of AllianceBernstein is forecasting first-quarter sales of 78,000 cars, which would be a 20% fall from the same period in 2019. “First-quarter deliveries have clearly been tracking well below the fourth quarter over the last several weeks,” Sacconaghi wrote to clients.
ALG, a company that tracks trends in auto sales, estimated that industrywide March sales fell 37% from a year ago. Analysts will tabulate a total for March sales after all automakers have reported their numbers.
Dealers had hoped to continue selling cars at the beginning of March, but customer traffic quickly dwindled as it became clear that the virus was spreading rapidly. Many dealerships nationwide remain open for repair and maintenance services, often with reduced hours.
“The market right now is really shellshocked,” said Brian Benstock, general manager of Paragon Honda in New York’s Queens borough. He said his service department was in “limp mode” and his sales area was dark.
The drop in sales is the second big blow to automakers.
Most companies have shut down factories across North America to prevent the spread of the virus among workers.
Automakers and dealers expect a bigger decline in April because stay-at-home orders will be in effect for most or all of the month in many parts of the country. Even as some states lift or relax those orders, consumers will likely stay away from showrooms for some time. To lure buyers, GM, Ford and Fiat Chrysler are offering zero-percent loans that last up to seven years for new car purchases.
A dramatic drop in sales in April could cause a painful chain reaction. With no buyers driving cars off their lots, dealers won’t have to order more from the manufacturers. That could force car companies and their suppliers to keep their plants idle or production low even once officials allow more people to go back to work.
“April is likely to see further historic declines, driven largely by a lack of consumer confidence and substantial increases in unemployment,” said Charles Chesbrough, a senior economist at Cox Automotive. “And that trend will likely continue into early summer, at best. The second quarter will be the real measure of COVID-19’s impact on the economy and the auto industry.”
GM, Ford Motor and Fiat Chrysler have cut or deferred pay for executives. GMand Ford have drawn on lines of credit to stock up on cash.