Covid-19 paralyzed U.S. auto gross sales in 2020, however issues may have been worse

A car dealer shows customers a vehicle at a dealership in Jersey City, New Jersey.

Angus Mordant | Bloomberg | Getty Images

New vehicle sales in the US are projected to decline by at least 15% this year in what would mark one of the worst annual declines in the industry since at least 1980.

In a normal year, such a rapid decline would have meant an industry in crisis. But in 2020 the overwhelming sentiment is “it could have been worse”.

“It’s been a tough year, but I think we’re ending in a much better place than we expected,” said Nick Woolard, director of Autoaker Analytics for TrueCar. “There was this sharp right turn early on that nobody expected and that drove the entire industry into pretty dark days, and the forecasts were all very bleak.”

In the depths of the spring’s first Covid-19 summit, new vehicle sales plummeted as auto plants closed and many dealerships were forced to close showrooms. Retail sales forecast by JD Power would decline as much as 80% in April, resulting in an expected sales level close to recession for the year.

However, retail sales to consumers rebounded much faster than forecast. Sales fell by around 34% in the second quarter. For the most part, they were driven by low – even 0% – interest rates, historically long financing offers, and people who wanted to drive on the open road rather than using public transport or airlines.

“One big comeback story of 2020 is without a doubt the rebound in retail vehicle sales, which have almost returned to pre-pandemic levels,” said Jessica Caldwell, Edmunds Executive Director of Insights.

2020 sales

Edmunds expects new car sales to decline 15.5% this year when final statistics are released in about two weeks. This is in line with other industry estimates calling for sales of around 14.4 to 14.6 million new vehicles in 2020 – up from 17 million or more in the past five years. Cox Automotive is forecasting a 15.3% decline, while TrueCar is forecasting a 15% loss from 2019 sales.

TrueCar reports that retail sales are expected to decline only 8% compared to 2019, while fleet sales to commercial and government customers are expected to decrease 43%.

If the projections are correct, 2020 will be the fourth largest annual decline for the U.S. auto industry since 1980 – after a loss of 19.1% in 1980 and a decline of 18% and 21.2%, respectively, during the Great Recession in the United States 2008 and 2009. But it could have been worse.

“This year presented the economy and the automotive market with incredible challenges. At the end of the year it is remarkable to see how well the industry has performed,” said Jonathan Smoke, chief economist at Cox Automotive.

Record profits

The lower fleet sales and the shortage of inventories due to operational shutdowns in the spring have led to better than expected earnings for automakers and to record profits for many listed dealer groups.

AutoNation, the largest retailer group in the United States, reported record earnings per share of $ 2.38 for the third quarter, up 102% year over year. This was due to a 40% increase in operating income despite a slight decrease in quarterly sales.

“It’s our absolute best quarter ever,” AutoNation CEO Mike Jackson told CNBC in October. “The demand for individual mobility has increased and I think this pandemic / housing has long-term changed the American psyche and it’s hard to predict if the last five years but the next three to five years demand has shifted.”

Other listed dealer groups such as Group 1 Automotive, Lithia Motors and Sonic Automotive also reported various record results this year.

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