Production Back? Check. Sales Outlook? Who Knows?
U.S. car market revives, but pace will vary
U.S. auto plants are all back online. Now the question is whether buyers will be there too.
Over the next two weeks, virtually every auto assembly plant expects to be operating at or close to pre-COVID-19 levels. But it’s far from certain whether consumers are ready to resume buying cars at anything close to last year’s pace.
Analysts predict a sales rebound after more than two months of restricted sales resulting from pandemic-related stay-home orders. But none expects a total recovery until sometime after next year.
Plenty of Questions
In 2019, passenger car deliveries in the U.S. slipped 1% to 17.1 million units. And this year? The estimates range from roughly 12.7 million to 15.7 million units.
Not much agreement on the details there. But the big-picture questions that define the forecasts are the same:
- How will consumers react if there’s a second COVID surge?
- What happens if the jobless rate remains high?
- How long will the U.S. economy slump?
- What about dealer inventory levels?
The economy has been hammered so strongly that any improvement looks great compared to a few months ago. Car sales in May, for example, surged 57% compared with the previous month. But the total volume—1.11 million vehicles, according to Cox Automotive—is one-third below May 2019.
It’s the same story when you look at annualized sales rate. May’s rate came in at a 20-year low of 12.2 million units. That’s a whole lot better than April’s abysmal 8.6 million pace. But it’s still 30% short of the 17.4 million-unit rate of May 2019.
To climb back to last year’s total, U.S. car sales from now on would have to beat year-ago levels by roughly 20%. Nobody expects that to happen.
Shorter term, carmakers are trying to guess what to do about inventories. Supplies of trucks definitely need refilling. But producers don’t want to overshoot an uncertain and unstable level of consumer demand.
Carmakers bolstered May’s sales with a bevy of incentives tailored to jump-start the retail market. But producers already are dialing back to conserve cash. Will that dampen demand? It certainly won’t help, coming on top of high unemployment and relatively low consumer confidence.
Dealer inventories began June at an 18-month low of 2.7 million units, Cox estimates. The shortage won’t get much help for another couple of weeks until the supply pipeline is refilled by factories that are still getting back up to speed.
But then what?
Long-term planning—which these days means anything beyond a few months—is fraught with uncertainty.
A big question is how well car sales will hold up after factories are fully up to speed and we all learn how to live in a world where COVID-19 continues to lurk.
Even then, economists say, it will take many months for the American economy to work its way out of a recession. Until then, stand by for a rollercoaster of continuously revised forecasts as we all settle into uncharted territory.
The Lexus ES sedan is more than just an offering within the company’s lineup.
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I'm not talking about a plastic Revell model of a '57 Chevy, but a real vehicle, one that rolls off an assembly line in 1999 with another 99,999 just like it right behind. Is it possible, or is this just a fantasy of the marketing department at Elmer's?