Automakers reported a plunge on Wednesday 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.
General Motors said its sales fell 7 percent and Fiat Chrysler said they fell 10 percent in the first quarter. Both companies said a significant decline in March offset strong sales in January and February.
In addition, Toyota, Honda, Hyundai and Mercedes-Benz reported declines in March ranging from 37 percent to 50 percent. A total for the month won’t be available until Thursday, when Ford Motor and a few other carmakers plan to report their sales.
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 at its plant in Fremont, Calif., on March 23.
Toni Sacconaghi of AllianceBernstein is forecasting first-quarter sales of 78,000 cars, which would be a 20 percent fall from the same period in 2019. “First-quarter deliveries have clearly been tracking well below the fourth quarter over the last several weeks,” Mr. Sacconaghi wrote in a report to clients.
ALG, a company that tracks trends in auto sales, estimated that industrywide March sales fell 37 percent 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 around the country 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 Queens. He said his service department was in “limp mode” and his sales area was dark.
Tom Maletic, a retired pharmaceuticals salesman in Napoleon, Mich., was ready to turn in a 2011 Ford Focus in need of major repairs a week ago, but the virus forced him to put off a purchase. Instead he spent $1,500 on fixing his Focus, which has 130,000 miles on the odometer.
“My wife said we could get a Mustang, but I wasn’t going to go out shopping for a car,” Mr. Maletic said.
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, G.M., Ford Motor and Fiat Chrysler are offering zero-percent loans that last up to seven years for new car purchases.
In St. Louis, where a lockdown order has been issued by the local government, Ann Kittlaus is unsure of how to trade in her family’s 2017 Acura MDX, since the lease is expiring soon. “We would have to have the dealer deliver a new one and take the other away,” said Ms. Kittlaus, a public relations professional and mother of two college-age children.
She added she would probably let the vehicle sit for a week to be sure it doesn’t have any traces of the virus. In any case, she said she is not in a hurry to make the trade. “It’s not like we’re going anywhere,” Ms. Kittlaus said.
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.”
Signs of strain have already surfaced. G.M., Ford Motor and Fiat Chrysler have cut or deferred pay for executives. G.M. and Ford have drawn on lines of credit to stock up on cash. Group 1 Automotive, a Houston-based company that owns 242 new-vehicle dealerships and 49 repair shops, has cut executive pay and furloughed 3,000 U.S. employees for at least 30 days.
Automakers are better prepared for a downturn than they were 11 years ago, when the industry was among the hardest-hit sectors in the recession of 2008 and 2009, and G.M. and Chrysler were revived only by government-supervised bailouts. With consumers reeling and credit markets frozen, auto sales plunged in 2009 to a low of 10.4 million cars and light trucks, a level at which few automakers were able to earn profits.
Since then, however, the companies have earned billions of dollars, stockpiled cash and rebuilt their creditworthiness. One of the toughest problems in 2009 was that banks all but stopped making auto loans, freezing out many consumers who needed vehicles or were still able to afford them.
Today, auto loans are readily available and interest rates are historically low.
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