Business models and project plans are unraveling as uncertainty becomes our new norm and with local government lockdowns and social distancing guidelines, car dealerships, in particular, are taking a hit. Used car sale giants like CarMax, AutoNation and LKQ Corp have plunged more than 20%. Sales on new vehicles have also dropped significantly as consumer confidence has rapidly declined, temporarily shuttering dealerships and manufacturing facilities across the country.
For many car retailers, March was a huge wakeup call and likely to shape their actions for the rest of the year. Tesla, General Motors, Ford and Toyota are among the most recent to announce production reductions as consumer demand has declined. Local government lockdowns like “shelter-in-place” have restricted vehicle sales and have resulted in closed auto showrooms.
New York, California and Washington State have some of the highest reported COVID-19 cases and subsequently the strictest shelter-in-place guidelines; dealerships in these three states started to reduce their workforce in early March. By March 25, recruitment firm Hireology saw over 15,000 available job postings disappear.
According to the National Automobile Dealers Association, U.S. dealerships employ over 1.1. million people and has approximated that about 225,000 of these employees are specifically in auto sales roles. Car servicing offices have also seen a decline in visitors but fewer job cuts. Auto sales forecasters expect that auto retailers will have to reduce a third of their employee personnel by May.
How bad will it get?
TrueCar, an online shopping portal for new and used cars and trucks saw a drop in sales by about 37%. They are expecting sales to drop off by 50-60% in April. Global information and analytics provider IHS Markit is predicting that the COVID-19 crisis will reduce 2020 domestic sales by about 15% and global sales by 12%. If the situation persists as is, we can expect to see sales fall behind those of the Great Recession from 2008 through 2009.
While many companies are transitioning their available staff to a virtual workplace, there are still plenty of people still driving the roads and others still in need of new cars. If you are looking to purchase a new or used car, you’ll have to review your local guidelines and current restrictions to determine where you can buy. Call your local dealership for further details on their store hours and how they are complying with local and national government ordinances.
Can we recover?
As dealerships across the nation have removed their in-person sales teams, the retailers are intensifying their online sales experiences for customers, as well as redefining how you can test drive the cars you are interested in. Car retailers are also introducing new incentive programs for new and used cars as well as new leasing options to help boost consumer confidence.
Ford, Nissan, Hyundai, Toyota, and GM are all offering different car financing options to their customers. For one instance, GM is sponsoring a deal that defers payment for the first 120 days and a zero-percent financing promotion for seven years. If you are currently looking to finance your vehicle, now is also a good time to research incentives allowing you to do that as well.