- Sales plunge, full extent not felt
- GM trucks jump ahead of Ford
- Ford “Cash for Clunkers” Trial Balloon
- Transaction prices still firm
Shelter-in-place rules and cutbacks in dealer operations hit the industry hard at the end of the first quarter as manufacturers report a sales decline of more than 13 percent. While 2020 sales were softer than last year, sales estimates of 16.8 million for the calendar year weren’t far off from previous record levels. Now, with sales cut off in highly populated states, some preliminary estimates put annual sales volume at between 13 and 14 million.
Because most manufacturers now report sales quarterly, the decline in sales is masked somewhat by relatively normal January and February sales. There is some evidence that sales may have crashed by as much as 30 or 40 percent in late March. As a result, most makers are showing declines of single or low double-digit numbers for the quarter.
Dealers, looking to keep some semblance of sales going, are resorting to digital retailing. Among the innovations is the ability to do as much of the transaction online as possible and then deliver the vehicle to the customer. Kelley Blue Book this week launched an at-home shopping and buying tool called Dealer Home Services. Participating dealers offer video walkarounds, can arrange at-home test drives and even deliver your purchase. Learn more about it here.
GM trucks jump ahead of Ford
General Motors’ numbers indicate a 7 percent sales decline in the first three months. Ford reports a drop of more than 12 percent and FCA just over a 10 percent drop. The quickly changing landscape allowed GM to take the top spot in truck sales, for the first time in memory, outpacing both Ford and Ram for pickup truck leadership. GM’s combined 197,743 sales of Chevrolet Silverado and GMC Sierra top that of the 186,562 of the Ford F-Series. Chevrolet retail sales of 144,734 put it in solid second behind Ford and back around Ram’s 128,805. Incidentally, Ram pickup sales actually rose 7 percent for the quarter.
The truck news, however, is probably a momentary bright spot as the industry hunkers down. Production, for the most part, is in limbo, so not only sales will tumble, but also inventories. Whether or not we see huge incentives when the economy cranks back up with a function of pent-up demand versus the number of vehicles on the ground. If manufacturers haven’t restarted production as quickly as the economy ramps up, sales could be strong with few incentives. Only time will tell.
Ford “Cash for Clunkers” trial balloon
While no one knows what the market will look like when the social distancing curbs are lifted, Ford sends up a trial balloon on another round of government-funded “cash for clunkers” incentives. Following the 2008 market meltdown, these programs put cash in consumers’ hands for new cars when they traded in an old “clunker”. Opinions on the program differ, with some saying it helped prime the new car market, while others felt it has little if any impact on stimulating sales by instead pulling ahead future transactions.
According to an interview in Automotive News, Mark LeNeve, Ford’s vice president of U.S. marketing, sales, and service, said “We think some level of stimulus somewhere on the other side of this would help not only the auto industry and our dealers, which are a huge part of our overall economy but will help the customers as well. We’re in discussions about what would be the most appropriate.”
LaNeve believes “Cash for clunkers was very effective at that time. It would be nice to think we could have something equally as effective for 2020 when we get out of this because it was a great program.”
Transaction prices still firm
The late March meltdown in new car sales did little to deter rising new vehicle prices. According to Kelley Blue Book data, the estimated average transaction price for a light vehicle in the United States stands at $37,736. That’s an increase of $972 or 2.6 percent over year-earlier figures. Month-over-month pricing hit a slight dip, down $38 or 0.1 percent.
“While the automotive industry and broader U.S. economy were brought to a near halt in March, average transaction prices remained stable from February and increased from this time last year, showing strength in line with the first two months of the year,” said Tim Fleming, analyst for Kelley Blue Book. “Prices were supported by the abundance of incentives quickly enacted by manufacturers and their captive finance companies, including 0-percent financing for 84 months and payment deferrals of up to 180 days.”
Where these prices go are uncertain. Manufacturers are offering 0-percent and other finance deals along with payment deferrals. A mitigating factor that may help prop prices up is the abundance of oil, which dramatically lowers the price at the pump. Low gas prices may translate into strong sales of higher-priced trucks, SUVs, and crossovers at the expense of lower-priced and higher fuel economy compact and midsize sedans.
One manufacturer that reports the biggest growth in transaction prices is Hyundai-Kia. An 8.8-percent gain in transaction prices is due to the successful launch of two new midsize 3-row crossover SUVs, the respective 2020 Hyundai Palisade and 2020 Kia Telluride. The launch of the all-new midsize 2020 Hyundai Sonata is another factor in Hyundai’s rising ATP.
By segment, EV’s posted an 11 percent year-over-year gain in average prices, while mid-size trucks continued to climb, rising 4.7 percent. Traditional cars experience a shift in fortune, with a 4.1-percent rise in subcompact ATP.
The rundown
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