Despite Deals and Covid-19 Stimulus sar sales plunged a record amount. But due to factory shutdowns and stimulus offers, dealer inventories are lower than normal.
Second-Quarter Sales Drop
Auto sales in the second-quarter are down by about a third according to the Wall Street Journal.
General Motors Co.reported a 34% drop in second-quarter sales compared with a year ago, with demand picking up in May and June. Toyota Motor Corp.’s sales fell by about a third while Fiat Chrysler Automobiles reported a 39% decline.
The drop wasn’t as steep as feared, and sales have improved steadily since late March. Heavy sales promotions and federal stimulus checks that went out to millions of Americans this spring spurred car demand despite spiking unemployment and stay-home orders across many states, dealers and analysts say.
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.
“The market and the retail consumer continue to recover beyond anyone’s expectations,” Bob Carter, Toyota’s sales chief for North America, said recently.
Summer Test Coming Up
Heavy incentives with stimulus check flying led to a 33% decline “recovery beyond anyone’s expectations.”
OK. Let’s let’s see the consumer encore and fleet sales in the midst of a Hertz bankruptcy.
If dealers return to pre-covid inventory levels, there will be a pick up in manufacturing.
Meanwhile ponder consumer spending changes.
“Spending by JPMorgan Chase’s credit & debit card holders fell 13% YoY in week through June 27, compared w/decline of 9.6% in the previous week. What’s more, the pullback was broad-based and not limited to states such as Texas and Florida, where the virus is spreading.”@business
— Danielle DiMartino Booth (@DiMartinoBooth) July 1, 2020
The Recovery Will Have Many Shapes, Not One
“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 @CoxAutomotive. https://t.co/AM7RfH3hmW
— Danielle DiMartino Booth (@DiMartinoBooth) July 1, 2020
Autos are another example of why The Recovery Will Have Many Shapes, Not One.
Mish
Folks, wait for the greater depression to pick up steam before buying a 30,40,50k USD vehicle. There is over capacity right now and when the bottom drops out the deals will be serious. 60 or 70% off. Wait for it.
Some models must still not be moving. My son, an electrical contractor, just bought a brand new 2019 Dodge Promaster utility van (for his work) at a 19% off list. It was still on the lot. He was delighted, as his he old work truck (another Dodge +250k miles) needed to be replaced.
Bought a new VW last October online from a MD dealer, I am in VA. Easiest most pleasant car purchase in 55 years. They delivered it, we signed the papers, all smiles.
That report was the past. My brother is in the car industry and says his staff is back on the road selling sales software/services. He confirms dealers have been working off used car inventory and will be getting cars at auction. Manufacturers will be feeling a slower/delayed recovery.
One of the paradigm changes his company supports is ordering a car online. The car buyer arranges for a test drive without a sales person. The sales person role is being re-purposed as scheduler / paper processor. At the end of the test drive, the car buyer buys or returns the car. The expectation is the sales to test drive ratio will go up because people usually try the car they want the most. Advertising is now more important than ever in getting the customer to want to try your car first.
I also just watched a youtube vid that said millions of dine in restaurants will not reopen, ever. As many as 40% of all restaurants in business in January will never reopen. And it pointed out that 56 million Americans are involved either directly in the restaurant industry or will be impacted by this sad fact.
On the other hand the auctions for restaurant liquidations should be just freaking awsome for the next couple years. It would be a great time to buy equipment for pennies on the dollar if you have a place to store it till it is in demand again.
And on the downside, it will be the mass production low end restaurant chains with the credit to withstand till things get better that will eventually survive. The report said that most stand alone owner operator restaurants will just never be back. And those that do survive will only survive through sharply reduced menu choices and higher prices. What a crime against humanity to have to eat at schlock chain restaurants where the “chef” only needs to know how to run a microwave oven. And get scalped at the same time. When I think of all the great meals in great restaurants I have had and how that will now be history I just want to cry.
It is not just business that is in a new Great Depression, it is our lives.
I bought a used pick up last month and they were like zombies in there, no kidding 1000 yard stare. The guy you sign the paperwork with was trying hard to sell me the warranty and when he finally gave up his voice was breaking when he said” what are you one of these guys that just doesn’t buy a warranty!”. I felt bad for him. When we were done signing he didn’t say thanks, congrats or anything just stormed off. I wished I had laughed at him then.
I’ve been trying to buy a new work truck for weeks but they don’t want to deal with you if your not financing. I’ve talked with 3 dealerships and can’t get a quote. I made an appt last Monday and showed up and was passed to 3 different people before walking out of there. And I made an appt for a commercial truck build/quote. I think they make their money off financing and warranties, if you’re not buying those you’re not getting a truck. This is the easiest sell, I know what it costs and I got the money and I need to buy. I don’t have anything to depreciate.
Something is seriously wrong with those people. I can’t believe I’m gonna have to travel to the Bay Area to buy a truck…hopefully. I might just wait, my current work truck only has 91k.
Another thing to think about would be online auctions, companies have bought these things and they may not even have been used because they were delivered after the shutdowns started. Now the companies are either permanently closing or sharply reducing and they take the hit on new rigs for depreciation, or the banks/liquidators are selling them off dirt cheap. No dealership bullshit, just high bit which might be half the cost of a cash deal at a dealerhip. You are right about them though, the quickest way to get pushy sales people off your back is to say you are a cash buyer. Of course trying to get a test drive may be hard after that.
I did get a truck like that! It’s a commercial lease return with 16k miles. At a dealership though. I prefer to deal with local people/dealership, but I will look into that online auction. I have never came out ahead at auctions after the fee and with lumber its usually 20% rotten/damaged. Now I need to get a 1 ton with a utility set up or flatbed.
Something will come through!
Have not tried buying vehicles through online auctions, but I did get a great oil painting for $56 bucks all in. I cannot make out the name of the painter but it is really pretty old and whoever it was knew how to do still life images, it is about 24X20. I also saw at the same auction a pair of Chinese figures that I think could have been worth tens of thousands, they were very old, someone was very actively bidding against me for them though, so I dropped it. They got them for $110. I can’t afford to bid when I have not seen the actual figures and confirmed their age, which is not always a good indicator of value, though I am pretty sure they were pre Ming dynasty. And since Covid these auctions have just exploded. Many backwater auction houses and estate sale houses are fumbling around trying to learn how to make the net work for them since they could not sell lots the old fashioned way. Places such as Kennedy Brothers of St. Pete, where I got my oil painting. Or link to hibid.com
Oh, there is pent-up demand alright.
But no pent-up purchasing power.
Unfortunately for me I went from about 5k to about 9. In Medford Oregon everywhere I shopped and went for other reasons was within a mile or two. The odd doctor appointment up in Portland would add about 520 miles, but that was less than annually. But here in Florida there is no mall, or concentrated shopping, and at least a few times per week I have to drive at least 10-20 miles to and back from someplace. Like yesterday I had to drive to Crystal River to get the paperwork for my homestead exemption only to find out when I got there they are closed to the public and will mail that to me. I was standing at their locked door, they could have shoved it through the mail slot. Life has changed and I think NOT for the better, how much to the worse remains to be seen. But maybe in the long run it will make people stronger because they have gotten fat and flabby and too dependent on others to take care of their needs.
there’s pent up demand, just not enough supply because of the factory shutdowns.
Somewhat this. Most of the dealer lots around here are empty or contain only cars in colors/options that no one wants.
If you are buying new, you want what you want, not leftovers or the rejected fleet vehicles.
Can confirm. My local Chrysler and GM dealers have inventory listed on their sites for big sellers like trucks, SUVs, CUVs and muscle cars, but when you look at the listing it says “vehicle in transit.”
However if you want to buy a cheap compact car like a Chevy Sonic, they have loads of inventory with fire sale prices.
It is a great time to be a young person with a job — you can get a serviceable small car with decent tech and fuel economy for around $12K.
I foresee a lot of repossessions this fall….
Heavy sales promotions aren’t enough to entice me to go on a test drive with the salesperson.
“On the plus side, the results were better than many expected.”
…
The incentives unheard of … 72 months @ 0.0% + 3 months no payments … talk about bringing demand forward. Way forward.
A loan you can pass on to your children
A mortgage.
The only incentive that I saw was for free interest on an eight year loan for a $50,000 pickup truck.
I didn’t buy a new pickup.
Yeah, I love it when they say NO INTEREST! I already ave zero interest in their deals.
Almost as good as get it now because these will not last. Yeah, buy it and it will not last.
The Good, the Bad, and the Ugly About the Fed’s New Credit Allocation Policy
So far these programs have been much ado about not much.
The facilities are little used … as “investors” have front run the Federal Reserve.
A lot of bark and not a lot of bite.
Things could change (and likely will), but I don’t foresee large scale losses for Treasury / Federal Reserve until private sector beaten up. Severely.