New car sales drop by record amount in April

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Preliminary numbers show sales declined by 53 percent

New car sales are expected to hit a record in April, but not in a good way. In fact, the Cox Automotive forecast calls for a record drop in sales due to the coronavirus (COVID-19) pandemic.

Because of shutdowns across the country, Cox Automotive believes new light-vehicle sales volume will fall to near 620,000 units, down 53 percent compared to last April and down 37 percent when compared to March, when the economy began to shut down in the middle of the month.

At an annual rate, April’s sales would result in sales of 7.5 million, significantly lower than last month's 11.4 million and far below last April's 16.5 million level.

To find an auto sales month as bad as this one, Cox Automotive says you have to go back to January 2009, when the financial crisis three months earlier had turned an ordinary recession into the Great Recession. Then, total car sales for the month fell to 655,000.

Silver lining?

As bad as the numbers appear to be, Charlie Chesbrough, senior economist at Cox Automotive, says there may be a silver lining.

"April is likely to be the sales bottom for the vehicle market during this crisis,” he said. “Recent sales data suggests demand is starting to recover modestly after the initial shock in March and early April. Year-over-year daily declines, while still high, are consistently showing improvement over recent weeks. Some people want to buy a vehicle or need to buy a vehicle, even in a pandemic."

It also helps that car dealers have quickly adjusted to the new environment, taking orders online and delivering vehicles to customers’ homes. Some have even provided solo test drives. A significant segment of the market -- largely millennials -- prefer that form of car buying and have helped companies like Carvana quickly develop a niche.

Geography matters

Cox Automotive also notes that the sales decline has been uneven, with sales falling most in markets hard-hit by the coronavirus. Policy responses from state and local officials also vary, with many states on lockdown for weeks and dealerships closed in large portions of the country. Sales are down everywhere, but some markets are more negatively impacted than others.

The big sales decline suggests consumers in need of a new car may find dealers more willing to bargain, although they may not be overloaded with inventory. Most auto plants shut down last month, so they have not been contributing to a mounting inventory of cars and trucks.

Detroit automakers this week have made plans to resume production by May 18 after consultation with Michigan’s governor and the United Auto Workers union.

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