| 1:25 PM EST

Sales, Inventories & a Question of What Happens Next

LMC and J.D. Power see some recovery. But don’t break out the balloons and champagne just yet


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“The global automotive market continues on a resilient path of recovery, as June sales were down 17% from a year ago on strength in China and South Korea. Most key markets around the world are entering an important phase in the reopening that will test new procedures for manufacturing and the vehicle-selling process. Risk for the remainder of 2020 and into 2021 remains elevated but the market’s path forward is currently better than previously expected.”

That’s Jeff Schuster, president, Americas operations and global vehicle forecasts, LMC Automotive.

If someone would have said in, say, late July 2019 that global sales would be off 17% a year later, you’d probably do such a hard eyeroll that you’d hurt your head.

And there’s another bit of data from LMC and J.D. Power: global light-vehicle sales during the first half of 2020 were down 27% compared with the first half of 2019.

Even with the reopenings and ~recoveries around the world, there is still an expectation that the global outlook will be down 20% from 2019.

How’s the U.S. Doing?

There is an expectation that overall July sales in the U.S. will be down. Down by 16.4% from July 2019.

“One factor contributing to the pause in recovery in July,” said Thomas King, president of the data and analytics division at J.D. Power, “is inventory constraints for many vehicles. While this is constraining overall sales, new production is arriving at dealerships daily and is being sold quickly to consumers.”

How quickly? Some 41% of all vehicles sold this month will spend fewer than 20 days on dealer lots. Still, last year it was 35%, so it is not like beer sales the day before the 4th of July this year.

What’s more, there is still money being put on the hoods: an estimated $4,236, or 10.3% of the average vehicle MSRP.

Compared with April incentives, this is almost trivial. King said, “While the deals in the market are still relatively strong, they aren’t exceptional like they were a few months ago. This points to strong underlying consumer demand for new vehicles.”

A Different View

Is there a “strong underlying consumer demand for new vehicles” or is this a case where there was a boom-let in June that was driven by people who were simply tired of sheltering at home and who decided that instead of looking at pictures and videos of new vehicles on the sites of the buff books or YouTube they’d go out and get a new set of wheels?

To be sure, there are those who had leases they had to turn in and replacements to get. And pandemic or not, some people, for a variety of socioeconomic reasons, just need to buy something.

For reasons of the economy and for achieving a semblance of normality there is a desire for the auto industry to get back and to achieve traction in the market.

Baseball Analogy (A Bit of a Stretch, But. . . )

This is like the desire for a return to professional sports (albeit at a much bigger scale).

Major League Baseball resumed this week. And while writing this I heard that due to a COVID-19 outbreak on the Miami Marlins the team is canceling games like Aroldis Chapman throws fastballs. . .and there is some thought that the entire season might be put into jeopardy.

Baseball Commissioner Rob Manfred told the MLB Network, “I don't put this in the nightmare category. We built the protocols to allow us to continue to play. That's why we have the expanded rosters. That's why we have the pool of additional players. And we think we can keep people safe and continue to play.”

Which seems to imply that there are the bigger rosters to replace those players who fall ill.

But when we look at this in the context of the auto market, when buyers fall ill they’re not going to go new vehicle shopping and the roster is pretty much what the roster is.

We hope the industry comes back soon. We hope that people think “Baseball, hot dogs, apple pie and Chevrolet.”

But with the number of people with COVID-19 and death tolls growing, with the huge number of unemployed people, with changes in people’s commuting patterns (a friend told me he leased a new vehicle a few weeks ago and is putting so few miles on it that he thinks he is likely to go from a two- to one-car household, and I suspect that’s not atypical), the numbers may improve vis-à-vis April 2020—but probably not April 2019.


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