It’s March 31, and first-quarter sales reports for automakers are just around the corner. Those reports won’t be apocalyptic thanks to decent sales in January, February, and some of March, but we will be able to extrapolate some of how bad things have gotten. And you can bet that extrapolation will be terrible!
“There are basically no U.S. auto sales right now,” Adam Jonas, an analyst with Morgan Stanley, wrote in a March 27 report. “Investors have fully embraced the reality that the U.S. auto industry may be shut down for one or two full months. We’re now being asked to run scenarios of six-month or nine-month shutdowns.”
“We just don’t know when and how this ends, and that’s the biggest problem right now,” said Jeff Schuster, senior vice president of forecasting for research LMC Automotive. “All of this uncertainty creates a lot of angst and that has been spreading really like a wildfire through the industry.”
JPMorgan Chase & Co. analysts are even more downbeat, predicting the pace next month will be between 6 million and 7 million. That would be below the 9.1 million level reached in February 2009, the worst monthly rate in decades.
To give some context, an annualized selling rate of 6 to 7 million vehicles is less than half of the more than 17 million vehicles that were sold in 2019. That is, simply put, astonishing. Somewhat more astonishing is that anyone will be buying a car now or in April, though I’m assuming a lot of those are fleet sales.
These numbers are grim, but they are also temporary. Just how temporary is anyone’s guess, but in China, at least, automakers are expecting things to get back to normal-ish. Here’s the latest via Reuters:
Volkswagen (VOWG_p.DE) expects vehicle sales in China, the world’s largest car market, to quadruple in March, it said, pointing to a recovery following the coronavirus pandemic.
“We are cautiously optimistic that the worst effects of the crisis will be behind us in two to three months,” said Stephan Woellenstein, head of Volkswagen’s China business.
Demand was still limited, Volkswagen said, adding it was prepared to ramp up capacity at its plants in the country, 22 of which had resumed production. Two vehicle plants in Changsha and Urumqi are still closed, the carmaker said.
Woellenstein said he expected vehicle sales of up to 1 million in March, up from 250,000 in February.
Earnings and sales reports from the major manufacturers that sell in the U.S. will trickle down over the next week or two, and each one will tell a slightly different story. How big of a hit will the luxury brands take? What about truck and SUV sales? Might this all make small cars popular again, like they were in the last recession?
That last rhetorical question is more hopeful on my part than anything, since gas is so cheap right now. But one can always dream.