COVID-19 and the Auto Industry’s Reckoning
Public safety measures and an uncertain employment outlook are withering consumer demand
As March turns to April, the public health measures enacted to combat the coronavirus pandemic are bringing sweeping changes to much of the U.S. economy. Among the hardest-hit is the automotive industry, which is facing a crisis as dealerships are shuttered while consumers are focused on staying safe and manufacturing has stopped (with the exception of Ford and GM plants making face shields and ventilators, which is welcome news for the country).
Comscore’s in-market shopper data is an early indicator of industry health and provides insight into what’s on the horizon for the auto industry. This data is measured via engagement with lower funnel shopping KPIs across 40+ 3rd party automotive shopping sites, such KBB, CarGurus and Edmunds.
As March 2020 sales results arrive, it’s looking more and more dire for the industry, with annual sales estimates coming in at 11.4 million vehicles, down from annual estimates of 16.7 million last month and 17.2 million in March 2019. Some experts are even more pessimistic than these early figures indicate – with predictions at fewer than 10 million vehicles, which would put the industry below 2009 recession levels.
Recent Comscore data showed a 25 percent year-over-year drop-off in new vehicle demand midway through March 2020. Full month performance is even worse. On a weekly basis, new vehicle demand fell 39% vs. a year ago during the 3rd week in March 2020 and fell 33% vs. a year ago during the final full week of March 2020. The ray of hope is that the final week of March had a slight uptick compared the week prior, coincident with the passage of the stimulus package. In addition, pickups remain popular shopping targets.
These figures support the notion that as people stay home, they’re not only staying away from dealerships, but they’re also spending far less time researching and thinking about that next new vehicle purchase. Shopping for a new vehicle just isn’t high on their list. Because of that dynamic, we can expect April 2020 demand to continue to trend well below year-ago levels as the pandemic continues.
Hope on the horizon?
The best hope for the industry’s long-term health is that eventually, social distancing measures will be lifted. When that happens, and the country begins to return to some semblance of normal and auto manufacturers begin to ramp up production, existing inventories should be able to accommodate pent-up demand from prospects returning to the market.
However, with job losses mounting and incomes being stretched, there may not be the dramatic demand spike that’s needed to help return the industry to where it needs to be. Consumers needing to catch up on expenses may power a more gradual recovery. Ultimately, it’s still too early to tell.
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