It Is Extremely Bleak For Auto Dealers Right Now

Illustration for article titled It Is Extremely Bleak For Auto Dealers Right Now
Photo: AP

Dealers, I wrote last week, are in a bit of bind, with a lot of people not buying new cars in the face of potential economic doom, and showrooms mostly vacant as people social distance themselves amid a global pandemic. It’s probably going to only get worse.


It’s hard to know what to start with in this new Automotive News story about how bad dealerships have it, but maybe let’s start with some numbers:

J.D. Power predicted a 1.7 percent decline in the daily selling rate for March, and the week ending March 8 was about as expected. But then, over the next four days, sales trailed the projected pace by 8 percent. Then, on March 13 and March 14, the deficit grew to 20 percent, and by March 15, it was 36 percent below the baseline projection.

J.D. Power is forecasting March sales will drop as much as 41 percent from a year ago. The company initially predicted U.S. sales of 16.8 million this year, but its new forecast is between 14 million and 16 million.

And here is the problem on the ground level, where people who might have purchased cars even a week ago are pulling the plug, even sometimes after telling dealers that they would but before signing. A new Chevy Equinox was the casualty in one such deal, though if we’re being honest that was probably for the better.

Since March 13, the coronavirus has cost the group four sales.

One man knew that his retirement savings had taken a hit and was no longer able to commit to the purchase of a new Chevrolet Equinox, [Aaron Koehn, owner of Ed Koehn Automotive Group near Grand Rapids, Michigan] said.

“He hadn’t signed anything yet, but he still felt terrible because he had made a commitment to us,” Koehn said.

Another customer, who had nearly completed a deal, backed out because his hotel job went from full time to part time because of the pandemic. A new car was no longer in his budget. Koehn said customers are scared of their current financial state and unsure how they will come out of the situation.

“We’re all feeling this together, so it’s hard not to have some compassion,” he said.

And in East Texas, where Fernando Varela has three Ford dealerships and one Chevrolet-Buick-GMC-Cadillac store, business was humming along until Wednesday, March 18. That’s when “traffic just stopped,” Varela said.

Over 17 million cars were sold in the U.S. last year, but any number predicted to be close to that feels wildly optimistic. Fourteen million, the low end of J.D. Power’s estimate, feels closer to reality, but, of course, it’s impossible to know how this will play out. Will everything be back online next month? In May? In June? Next year?

The Coronavirus numbers in New York, the epicenter of America’s pandemic, aren’t slowing down at all, suggesting that we’re somewhere still in the beginning of this:


Back to dealers, from a different Automotive News story today:

Preliminary results from the survey by the Automotive News Data Center found that more than 9 out of 10 respondents expect business in 2020 to be worse or much worse compared with last year. In the February survey, nearly half of the respondents projected that business would be better this year vs. 2019.

“It’s a day-to-day emergency, and we are learning and trying to act with compassion while still running a business,” one dealer said in the latest survey. “From last week to this week it has taken a 180-degree change. But we will survive.”

Just six weeks ago, only 1 in 10 dealers thought the profit outlook for 2020 was worse or much worse.


People will still need to get their cars repaired, and auto repair has been deemed an essential business in places like New York that (functionally, if not in name) are operating under shelter-in-place orders. And so some dealers will be reliant on that, almost exclusively, but long-term the play for many of them seems to be to ride this out and hope there is a huge glut of sales on the other side of it.

Dealers who have been around long enough will remember similar sales climates during the Great Recession, and after 9/11 before that, though the scary part about coronavirus is that no one knows what’s on the other side of this, or when it will end. Our own governmental response has been hugely inadequate, especially on the federal level, though according to some experts that may shorten the time it takes to flatten the curve, if also make things much deadlier.


There has also been talk of getting help from Congress, in some form, but dealers will have to join the pack when it comes to getting money from the government. Most of them, like the rest of us, will likely have to just sit and see how this plays out and improvise along the way, as things get grimmer and grimmer.

News Editor at Jalopnik. 2008 Honda Fit Sport.


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