Will Auto Sales Boom After COVID-19?

Soon after lockdown measures were lifted in Wuhan, the Japan Times reported a considerable increase in consumer visits to dealerships in Wuhan, the epicenter of the pandemic. Sales in China dropped as high as 96 percent during the crisis: Chinese showrooms resumed business as of April 3 and by the end of the month automakers had shipped 22 million vehicles to showrooms and dealerships, a yearly 0.9 percent increase and the first registered since June 2018. 

Volkswagen and BMW have seen a sales recovery in China as well. "It is clear to see that China will go through a V-shaped (recovery)," told Jergen Stackmann, Volkswagen executive responsible for passenger car sales and marketing at the Volkswagen brand to Reuters. CEO of Volkswagen Group in China, Stephan Woellenstein, affirmed on a statement that consumers are moving away from the risks of infection that are present on public transport. "We have seen interest from a new kind of customer, those keen to own a personal vehicle to escape the risk of infection on public transport – many of them first time car buyers, a group accounting for 60 percent of customers in China." he says. 

In Europe the scenario could be different. "We are not counting on a V-shaped recovery for Europe. We will see a two-speed Europe. Southern Europe was hit really badly: Italy, Spain and to some extent France. We expect recovery to take much longer, it will be bathtub shaped process," says Stackmann. BMW has already adjusted its profitability margins to decrease between zero and 3 percent during 2020. “The decisive factor for the adjustment is that the measures to contain the coronavirus pandemic are lasting longer in several markets and are thus leading to a broader negative impact than was foreseeable in mid-March,” BMW said on a statement. 

The UK was among the European markets that took the worst hit in sales. The Society of Motor Manufacturers and Traders reported only 4,321 new vehicles were sold, the lowest level in over 30 years and a 97 percent monthly fall. France and Italy reported a similar figure, according to Reuters. Interestingly enough, Tesla Model 3 was the top selling model in April with 658 units sold.

On the other side of the Atlantic, the US market reported sales plummeting between 39 and 54 percent from March to April, slightly below the forecasted 53 percent. In early April, J.D. Power reported early signs of recovery. "We are now firmly in a period where we see sales of new vehicles start to recover," said Thomas King, President of the Data and Analytics Division at J.D. Power to CNBC. The firm expects May to be critical for the US automotive industry taking into account that OEMs will shortly resume operations. “We are now in an environment where dealers are really starting to burn through their inventory. That makes it absolutely key that we get the manufacturing operations back up and running in May,” King says.

As for Mexico, early this week INEGI published April sales figures. Brands in the country reduced their sales by an average of 50.5 percent and overall sales dropped 60.1 percent compared to March and 64.5 percent compared to April 2019. Only 34,903 units were sold, which sets an historic low in sales not seen in decades. Accumulated sales, however, look similar to 2013 and 2014 levels. Fausto Cuevas, Director General of AMIA told Mexico Business News that the first step was to focus on getting ready to resume production soon. Director General of CLAUZ, home to Volkswagen and Audi, Monica Doger, agreed with Cuevas while highlighting the need to ensure that workers remain safe from contagion at all times.

Taking into account the historic lows in sales the industry is experiencing worldwide, it will not be surprising to expect V-shaped recoveries in markets where economic downturns are softer. On the other hand, more vulnerable markets could experience a more gradual recovery throughout the year.