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    Automakers just reported big coronavirus-related sales dips, but the worst is yet to come - Business Insider

    Abstract:2020 got off to a decent start in January and February, but shutdowns in the second half of March had an immediate negative impact.

      Business Insider

      Automakers reported declines in first-quarter US sales that were worsened by the COVID-19 coronavirus pandemic.GM and FCA were down 7% and 10%, respectively. Toyota reported March sales that were down nearly 40%.2020 got off to a decent start in January and February, but shutdowns in the second half of March had an immediate negative impact.The second quarter should be significantly worse: Vehicle production has been suspended in North America, consumers are reluctant to make big-ticket purchases, and dealerships are closed except for service.Visit Business Insider's homepage for more stories.

      On Wednesday, automakers selling vehicles in the US reported first-quarter and in some cases, March sales. They weren't terrible, given the worsening coronavirus pandemic, the impact of which largely hit the last two weeks of March.But they were notable. In Detroit, General Motors reported a 7% decline and Fiat Chrysler Automobiles saw 10%; Ford reports on Thursday and is likely to endure a similar slide. March was the big problem, unsurprisingly. After starting the year on a pace that might have matched 2019, when about 17 million vehicles in total left dealers' lots, widespread shutdowns to curtail the spread of COVID-19 reduced March sales to recession levels. Automakers have rolled out various incentives to make it possible for customers to continue buying vehicles. And although all North American manufacturing is now effectively suspended, automakers have a decent amount of inventory on hand — a few months worth, for popular and profitable pickup trucks and SUVs.Big sales drops are coming in the second quarter

      The recovery from the 2008-09 crisis.

      Business Insider

      With much of the industry switching from monthly to quarterly sales reporting, Q2 is going to be a matter of estimation for some big carmakers. For the companies that continue to report monthly, Toyota provided a preview, with the tally for March down almost 40%.

      This has analysts predicting a sales pace for 2020 that resembles what happened during the financial crisis.“Current tracking suggests an overall market in March 2020 in the 10 million to 12 million ... range,” said Cox Automotive Senior Economist Charlie Chesbrough in an email.“As the pandemic rolls across America, consumers' interest in big ticket purchases like vehicles has all but disappeared. And for those folks still interested in purchasing, in many markets they can't because of mandated dealership closings. April is likely to see further historic declines, driven largely by a lack of consumer confidence and substantial increases in unemployment.”For context, a recessionary sales market in the US would typically drop sales to 13-15-million pace; 10-12 million is much closer to a catastrophe. The situation is essentially unprecedented. If the coronavirus weren't shutting US economic activity, a moderate 2020 downturn would actually be manageable for many automakers, as the vehicles they are selling have historically high transaction prices — $37,736, according to Cox — and are profit drivers. FCA, for example, reported sales increases for Ram pickups.

      GM also reported year-over-year quarterly improvements for its Chevy and GMC pickups. So there could be some bright spots.Best case, worst case, or something in between

      Consumers can't get to dealerships.

      REUTERS/Carlos Barria

      The best-case scenario is that the pandemic is brought under control during the second quarter and automakers are able to both restart and salvage some sales, perhaps capitalizing on pent-up demand. But the worst case is that the crisis lasts through the summer. That would test the automakers such as GM, which has said in can remain profitable in a 10-11-million national sales pace.If the reality is something in between, then a replay of the 2013-2015 period could be in order, as the market gradually recovers, as it might from a cyclical recession. “While the impact is dramatic, with no definitive end in sight, it's not unprecedented,” Karl Brauer, executive publisher of Autotrader and Kelley Blue Book, said in an email.“Industry veterans have seen steep downward trend lines before, and they're always followed by upward lines once circumstances change. Automobiles are an integral part of the US and global way of life. The need for new automobiles isn't changing, even if the near-term sales rate is going through a dramatic shift.”

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